How companies can effectively manage cashflow

Mastering working capital management helps to unlock financial resilience and fuel growth. Discover how companies like global recruitment agency Talent effectively manage cash flow.

Businesses that understand and efficiently manage their cash flow can keep working capital costs down and have the confidence to take advantage of opportunities and meet unexpected challenges.

This requires a two-pronged approach, says Elizabeth Huxley, General Manager, Working Capital, at CommBank.

Firstly, there is optimising the amount of cash coming into and going out of the business, and secondly, drawing on a loan facility to make up any shortfall. “The collaboration between finance, operations and the supply chain teams in a business is critical, all those areas together determine what cash flow needs there are for the business,” she says.

Balancing inventory levels with precision

Striking the right balance in inventory management is a constant challenge. Finance and operations teams must work closely to determine not just how much stock they want to hold, but how much they actually need — without tying up too much capital or risking shortages. “Ultimately, businesses aim to balance their inventory, avoiding both excess and shortages, while minimising the time their cash is tied up,” says Huxley. But achieving this requires precise forecasting, strong collaboration and the agility to adjust as market conditions shift.

An important part of inventory management is forecasting, which requires collaboration between finance, operations and supply chain, but also the customer and sales teams.

Robust sales forecasts can help a business manage the fine line between holding too much inventory and holding enough to meet customer needs.

“The cash flow gap is the time between outgoing payments and incoming receipts. Understanding this gap helps identify the best funding approach,” says Huxley.

Supply chains and pricing

The supply chain team plays a central role in cash flow, because they’re responsible for negotiating the price and terms of goods the business holds in inventory. “Collaboration is essential for businesses to gain a clear understanding of their cash flow gap and to explore strategies to support or bridge that gap effectively,” says Huxley.

Tools and tips to manage cash flow

While human collaboration within an organisation is critical, there’s tech to lean on too.

The Business Cash Flow tool, which can be accessed by customers in the CommBank app, offers a monthly summary of incoming and outgoing cash flow. The tool provides a cash flow summary at a glance, allows comparisons with the previous 12 months and provides a real-time transaction history.

There is also Daily IQ, a free business insights tool for eligible CommBank business customers. Business leaders can compare trends and changes in their cash flow balance, which will help them to identify risks and opportunities for their cash to work harder.

Businesses can also improve their cash flow by talking to their debtors, potentially offering small discounts to those that pay early.

Unique cash flow challenges by sector

Businesses in the services sector face a different cash flow challenge to those that hold inventory and buy and sell goods.

Talent is one such business. The company provides technology contractors for enterprise and government clients in Australia, New Zealand and North America.

It is a high-volume, lower-margin business, with more than $1 billion a year passing through its bank accounts. Consequently, managing cash payments and collections is crucial.

Global CEO Mark Nielsen explains that the business pays its 4000-odd contractors fortnightly, but is only paid by its customers between one and five weeks in arrears. Talent — which also provides project delivery and people and culture services — pursues several strategies to optimise its cash flow.

Tight margins

Most of Talent’s business is generated from long-term supply contracts and payment terms are a key consideration. When determining contract pricing, the company also considers the length of requested credit terms and cost of funding.

It is also careful to ensure the invoices it sends out are 100% correct, because clients will query any error, which can cause a payment delay.

The five-person credit team is incentivised to keep days sales outstanding (DSO) as low as possible. This is a crucial metric. Nielsen says that for every day the DSO slips, the debt balance increases by $2 million, with additional interest incurred of around $100,000 per annum.

Talent’s CEO, COO and Risk Officer closely monitor cash flow, receiving daily cash collections reports. “Each week, the financial controller sends out a pack showing net cash or net debt position within the organisation, which we monitor to make sure that it’s not out of sync compared to last year,” says Nielsen.

Closing cash flow gaps

The business also draws on a working capital facility from CommBank. The facility lends against the debtors’ ledger.

Huxley says that once a business has put in place good stock and inventory management, accurate cash flow forecasting and an efficient debt collection process, they can fill the remaining cash flow gap with a loan facility.

To unlock cash caught up in receivables, Stream Working Capital is a CommBank solution to help manage fluctuations in business cash flow. Rather than securing a loan against a property, such as the business owner’s home, it uses the business’ outstanding invoices for security.

“We use invoices as collateral, essentially saying, ‘We recognise you will receive this payment in 90 days, so we can advance the funds to you immediately.’ It means businesses can support their cash flow needs right when they need it,” says Huxley.

Building confidence to grow and adapt

Importantly, it’s quick and efficient for businesses to manage their use of the facility. Rather than requiring businesses to provide monthly reconciliations and details of invoice, Stream Working Capital links into the business’ own accounting software and automatically receives the receivables data.

Another CommBank loan product, Working Capital Facility, unlocks cash tied up in receivables - like Stream - but also in inventory. “These financial solutions give businesses the confidence to make strategic decisions, navigate unexpected challenges and seize growth opportunities that might otherwise have been out of reach due to liquidity constraints,” says Huxley.

This article first appeared under the headline 'Smart cash flow strategies' in the June 2025 issue of Company Director magazine.