cash flow management

Cash Is King

In these times of seemingly ever-increasing costs, improving cash flow is crucial for the financial health of a business. Here are some strategies to help you do that:

  1. Invoice Promptly: Send out invoices as soon as goods or services are delivered. Consider offering early payment incentives to encourage faster payments.
  2. Follow up on Payments: Establish a system for following up on overdue payments. This might involve sending reminders, making phone calls, or even offering payment plans.
  3. Manage Expenses: Analyse your expenses and cut any unnecessary costs. Look for opportunities to negotiate better terms with suppliers.
  4. Inventory Management: Avoid overstocking inventory, as it ties up cash. Use just-in-time inventory practices when possible.
  5. Tighten Credit Policies: Be cautious with extending credit to customers. Screen new customers for creditworthiness and set clear credit terms.
  6. Reduce Operating Costs: Evaluate your fixed and variable costs. Look for ways to reduce expenses without sacrificing quality or service.
  7. Increase Sales: Focus on marketing and sales efforts to boost revenue. Consider diversifying your product or service offerings to attract more customers.
  8. Improve Cash Reserves: Build up cash reserves during periods of strong cash flow to cushion against lean times.
  9. Negotiate with Suppliers: Negotiate favourable payment terms with suppliers. Extended payment terms can provide some breathing room.
  10. Consider Financing: Explore financing options such as business loans or lines of credit to cover short-term cash flow gaps.
  11. Monitor Cash Flow: Keep a close eye on your cash flow through regular financial reporting. This will help you spot issues early and take corrective action.
  12. Forecast Cash Flow: Create cash flow forecasts to anticipate future needs and plan accordingly.
  13. Streamline Operations: Look for ways to make your business processes more efficient, which can reduce costs and improve cash flow.
  14. Offer Discounts for Early Payment: Consider offering discounts to customers who pay their invoices early to incentivise prompt payments.
  15. Debt Management: Manage your existing debt wisely, ensuring that interest payments and principal repayments fit comfortably within your cash flow.

A list like this can be a bit overwhelming so just pick one or two to start off with.  Focus on those for the next month or so and see how you go.  Then pick another strategy and build from there.

Remember that improving cash flow often requires a combination of strategies tailored to your specific business needs and circumstances. It’s essential to regularly review your financial statements and adjust your approach as needed to maintain healthy cash flow.

A crucial part of the equation is having accurate and up-to-date financials.  None of these will work if you are flying in the dark.  That’s where we come in.  Activ8 can do the number crunching so you can focus on your business.  No more losing sleep over the books.  Give us a call on (07) 3367 3366.


What Are The Tax Consequences of Rental Properties ?

If you own a rental property or are thinking of buying one, it’s a great idea for you to understand the tax consequences. Here is a summary of how rental properties’ income and expenses can affect your tax return, including what deductions you can claim and the records you need to maintain.

Rental Income

The income received during a Financial Year must be included on your tax return.  Rental income and expenses are attributed to each co-owner according to their legal interest in the property.

If your property is rented to family members or friends at below market rate, you can only claim deductions up to the amount of rent charged.  The property cannot be negatively geared.

If you use a Property Manager, they usually provide you with an Annual Summary showing the amount of rent earned during the year and any expenses they have paid on your behalf such as any repairs and maintenance, letting fees, advertising and property management fees.

Rental Expenses

There are three categories of rental expenses:

  • Expenses that are not deductible
  • Expenses that you can claim an immediate deduction in the income year you incur the expense
  • Expenses that can be claimed over several income years.

Non-Deductible Expenses

These include:

  • acquisition and disposal costs of the property. These are added to the cost base of the property
  • expenses not actually incurred by you, such as water or electricity usage charges paid by your tenants
  • expenses associated with periods where your property (including your holiday home) was not genuinely available for rent
  • expenses that are not related to the rental of a property
  • travel expenses

Deductible Expenses

To claim deductions against your rental income, your property must be genuinely available for rent. This means that the property is advertised giving it broad exposure to potential tenants and those tenants are reasonably likely to rent it.  Word of mouth, limiting the time the property can be rented or you place unreasonable restrictions on the property would indicate the property is not genuinely available for rent.

You will need to apportion your expenses if any of the following apply to you:

  • your property is genuinely available for rent for only part of the year
  • your property is used for private purposes for part of the year
  • only part of your property is used to earn rent
  • you rent your property at non-commercial rates


Interest is the biggest deduction.  Interest paid on the loan used to purchase the property is deductible, provided that all the money borrowed was used to purchase the property.

For line of credit accounts that are used privately as well, the interest claim must be apportioned for the private portion.

Repairs and Maintenance

Repairs made to the property during the period it is rented are deductible.

Repairs must relate directly to wear and tear or other damage that occurred as a result of your renting out the property.  Repairs generally involve a replacement or renewal of a worn out or broken part, for example, replacing worn or damaged curtains, blinds or carpets between tenants.

Maintenance generally involves keeping the property in a tenantable condition, for example repainting faded or damaged interior walls.

Initial repairs are not deductible. Initial repairs include repairing defects, damage or deterioration that existed at the date you acquired the property. These can be used to reduce a capital gain on disposal.


Improvements you make to the property are not deductible in full. They need to be depreciated and claimed over their effective life.  Examples of improvements include:

  • Landscaping
  • Insulation
  • Adding on another room
  • Extensions
  • Replacement of an entire structure such as a complete fence, stove, kitchen cupboards or fridge

Other deductible expenses can include:

  • advertising for tenants
  • bank charges
  • body corporate fees
  • cleaning
  • council rates
  • electricity and gas
  • gardening and lawn mowing
  • insurance
  • land tax
  • legal expenses re leases agreements.
  • lease costs
  • pest control
  • property agent’s fees
  • letting fees
  • quantity surveyor’s fees
  • security
  • stationery
  • postage
  • telephone
  • internet
  • water rates

Expenses deductible over several years:

  • Borrowing expenses – these are written off over the term of the loan or 5 years whichever is less
  • Depreciation for capital assets
  • Capital works deductions

Capital Works Deductions

If the building is under 25 years old you will be entitled to claim a deduction of 2.5% per year of the original cost of construction of the building for up to 40 years from the original date of construction.

If you do not know the building cost you can contract a quantity surveyor to determine the building costs and prepare the depreciation schedules for the property and determine what can be claimed.  The fee is tax deductible.

If the previous owner was allowed capital works deductions, earned assessable income from the property and the capital works started after 26 February 1992, they are required to give you, as the new owner, information that will enable you to calculate those deductions going forward.

Records you need to maintain

You should keep records of your rental income and expenses for five years from 31 October or, if you lodge later, for five years from the date you lodge your tax return.  If at the end of this period you are in a dispute with the ATO that relates to your rental property, you should keep the relevant records until the dispute is resolved.

Records of expenses must include the name of the supplier, amount, nature of the expense, and the date.