Help my business is making Money (Profits) but we are running out of Cash (Small Business Cash Flow Explained)

Written By Augmenta Advisory

Are you running a profitable business but still struggling with cash flow?

If your financial reports show profit but your bank balance feels tight, you’re not alone. Many Australian small and medium-sized businesses experience cash flow problems, even when revenue is strong.

Understanding the difference between profit and cash flow is one of the most important financial skills a business owner can develop.

In this guide, we explain:

  • Why profitable businesses run out of cash

  • The most common small business cash flow mistakes

  • How to improve cash flow management

  • Why cash flow forecasting is critical for growth

Profit vs Cash Flow: What’s the Difference?

Profit is an accounting measure.

Cash flow is a liquidity measure.

Profit is recorded when income is earned and expenses are incurred , not when money physically enters or leaves your bank account.

This means your business can:

  • Record revenue before customers pay

  • Commit to expenses before cash is available

  • Show strong margins but still experience cash shortages

If you’re profitable but constantly watching your bank balance, this disconnect is likely the reason.

5 Reasons Profitable Businesses Experience Cash Flow Problems

1. Slow Customer Payments (Accounts Receivable Pressure)

One of the most common causes of small business cash flow problems is delayed customer payments.

You’ve made the sale.

You’ve issued the invoice.

But payment terms of 30–60 days create a timing gap.

Meanwhile, wages, rent, suppliers and tax obligations continue.

Solution: Actively manage receivables and implement structured debtor follow-ups.

2. Rapid Business Growth

Growth consumes cash before it generates stable returns.

Hiring staff, purchasing inventory, increasing marketing spend or upgrading systems all require upfront investment.

Without proper cash flow forecasting, growth can strain working capital — even in a profitable business.

3. Margin Erosion and Uncontrolled Expenses

Many businesses lose cash through:

  • Rising supplier costs

  • Unreviewed subscriptions

  • Discounting without margin analysis

  • Increased overheads

Individually small. Collectively significant.

Regular expense reviews and margin analysis are critical for sustainable cash flow management.

4. Poor Tax Planning

GST, PAYG and company tax liabilities are predictable — but only if forecasted.

Without proactive planning, tax payments create sudden cash flow pressure.

Strategic tax forecasting prevents avoidable cash stress.

5. No Cash Flow Forecast

This is the most overlooked issue.

Many business owners review historical financial reports but don’t forecast cash flow 3–6 months ahead.

Without forward visibility, decisions become reactive:

  • Can we afford to hire?

  • Is it safe to invest?

  • Should we expand?

Cash flow forecasting transforms uncertainty into informed decision-making.

How to Improve Small Business Cash Flow

If your business is profitable but cash feels tight, here are practical steps:

✔ Implement Rolling Cash Flow Forecasts

Project cash inflows and outflows at least 3–6 months ahead.

✔ Review Debtor and Creditor Terms

Shorten payment terms where possible and negotiate supplier terms strategically.

✔ Monitor Gross Margins Monthly

Small margin improvements significantly impact cash position.

✔ Plan Tax Proactively

Provision monthly for GST and income tax liabilities.

✔ Upgrade From Compliance to Financial Strategy

Bookkeeping records history. Strategic advisory manages the future.

Why Cash Flow Forecasting Is Essential for Business Growth

Sustainable growth requires liquidity.

When your cash flow is predictable:

  • You hire with confidence

  • You invest strategically

  • You reduce financial stress

  • You protect business stability

Cash flow management is not just about survival — it’s about controlled, intentional growth.

How Augmenta Advisory Helps Profitable Businesses Strengthen Cash Flow

At Augmenta Advisory, we specialise in helping Australian business owners move beyond basic bookkeeping and into strategic financial clarity.

Our services include:

  • Cash flow forecasting and scenario modelling

  • Working capital optimisation

  • Margin and cost analysis

  • Tax planning support

  • Financial dashboards for decision-making

We help business owners understand not just where their business has been, but where it’s going. Especially with the changes to Payday Super effective 1 July 2026, managing cash flow is now more important than ever. Late or missed payments will result in penalties your business just can’t afford.

If you’re running a profitable business but experiencing cash flow stress, the issue isn’t necessarily revenue.

It’s visibility.

With the right forecasting, systems and advisory support, cash flow can shift from a source of anxiety to a strategic advantage.

Ready to Improve Your Business Cash Flow?

If you want clearer financial visibility and stronger cash flow management, book a strategy conversation with Augmenta Advisory today.

Let’s turn your numbers into confident decisions.

Augmenta Advisory
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