In this week’s Let’s Talk, our industry experts discuss spotting early cash flow warning signs, from payment pattern shifts to dangerous financial behavior trends.
This week’s edition of Let’s Talk brings together a panel of seasoned experts to discuss one of the most critical challenges facing businesses today: spotting cash flow warning signs before they become catastrophic.
Cash flow problems don’t happen overnight, they build gradually, often hiding in plain sight until it’s too late to course-correct without drastic measures. Whether you’re experiencing rapid growth, navigating seasonal fluctuations, or simply want to strengthen your financial oversight, this expert roundup provides actionable guidance on monitoring, measuring, and managing your cash flow before minor issues escalate into existential threats.
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Sally Davies, General Manager of Solo and Embedded Finance at MYOB
“Cash flow is the lifeblood of any business. Without healthy cash flow, even highly resilient businesses risk stalling – making it difficult to pay suppliers, cover expenses, invest in growth, and take advantage of new opportunities. That’s why it is essential for SME owners to watch for warning signs and take action early to avoid any potential problems.
“Here are five red flags to keep on your radar:
- Overdue invoices piling up – Constantly chasing payments is a sign your cash cycle is under pressure.
- Too much reliance on a few clients – If one major customer pays late, or leaves, it can disrupt your entire business.
- Sales growing but bank balance shrinking – A disconnect here points to higher costs, stretched debtor days, or margin issues.
- Overdrafts and delayed supplier payments – Pushing out your bills signals cash going out faster than it comes in.
- Stock and overheads creeping up – Excess inventory and rising expenses quietly lock up the cash you need to stay agile.
“The best way to protect your cashflow is proactive monitoring. Regular cash flow forecasting looking three, six and even twelve months ahead is vital. Combining this with digital tools that connect invoicing, payments and accounting, such as MYOB Business or AccountRight, will give you visibility and help keep growth on track.”
Brian Wienke, Product Marketing Director, Oracle Construction and Engineering
“Spotting cash flow warning signs early is critical in construction, where payment delays can quickly ripple across entire projects. Recent advancements in Construction Payment Management software, such as Oracle Textura, can deliver the transparency and financial discipline needed to identify potential red flags before they escalate. Through standardized processes and real-time dashboards, General Contractors can gain instant visibility into invoice approvals, payment statuses, and compliance requirements for every subcontractor. This enables timely detection of payment delays, variances in forecasted versus actual cash outflows, and systematic trends that may signal emerging risks. Automated compliance verification further reduces bottlenecks that can impact cash flow.
“From the Owner’s perspective, Oracle Textura provides end-to-end visibility into payment workflows, tracking funds from initial commitments through to disbursement. Owners are able to compare actual payments with budget allocations, quickly spotting deviations that could indicate cash flow stress or potential overextension. Detailed records and consolidated reporting also help mitigate payment disputes and deliver the insights needed for proactive financial planning.
“By bringing together comprehensive, accurate data and automation, Oracle Textura empowers construction teams to spot, address, and prevent cash flow issues, helping projects stay on track, on budget, and on time.”
Paris Buckland, CEO, StorePro
“One of the most valuable things you can do to spot cash flow warning signs before it’s too late is to build a habit of checking in regularly, not just when something feels off. That includes reviewing key financial metrics, understanding what’s driving costs, and looking at how money is flowing through the business. It also means making time each week to check in on your cash flow. A simple habit like this can help you avoid surprises, give you more confidence in your decisions, and keep the business steady.
“Another important factor is reducing waste. This is not just about cutting expenses, but improving how things are done. Clunky systems, unclear processes, or duplicated work can quietly drain resources. Looking at operations with a financial lens can free up cash without hurting performance.
“It also comes down to how you use your numbers. It’s not just about tracking revenue and profit at the end of each month. Strong businesses look at finance in context. They use it to guide decisions, spot problems early, and stay focused on what matters most.
“Stable businesses treat finance as part of everyday thinking. They build habits that connect the numbers to real actions, and that’s what helps them stay focused, resilient, and ready to grow.”
Lynne Walton, Founder and CEO, Access Intell
“For businesses that offer trade credit, their accounts receivable balance has a significant impact on cash flow. Smart businesses are proactively monitoring their customers for red flags that indicate they are likely to pay late or become insolvent. These can include an ATO business tax debt default, court actions, certain ASIC updates, loss of license, or changes to credit risk scores from providers like Access Intell. Businesses need to know about these as soon as they happen, to act quickly and minimise cash flow impact. Actions could include immediately changing payment terms to cash on delivery, working with the customer on a payment plan to reduce outstanding debt, or just closely monitoring their payments for a period of time.”
Elvis Sehovic, Head of Business Services, Polyglot Group
“Cash flow problems don’t usually come out of nowhere. They build up over time. If you’re watching closely, the signs are there well before things get serious.
“The first one I look for is a consistent stretch in debtor days. If your customers are taking longer to pay, you’re effectively financing their business with your own. That puts pressure on your cash position and limits your flexibility.
“The next is margin compression. If your gross margins are trending down while revenue looks stable, it usually means your costs are rising faster than your cash is coming in. That’s a warning sign. If you’re also relying more on overdrafts or short-term finance just to meet regular obligations, it’s a clear signal that operational cash is falling short.
“Another red flag is delaying payments to suppliers, staff, or statutory bodies like the ATO or ASIC. It might buy you some time, but it damages your credibility and makes future cash flow even harder to manage. And if you’re running the business without rolling forecasts or real-time cash reporting, that’s a problem in itself. You can’t manage what you can’t see.
“Strong cash discipline isn’t optional. Spot the signals early, act decisively, and cash flow becomes a strategic tool and not a survival mechanism.”
Steven Nicholson, Outsourced CFO, GearChange Business Advisory
“Every business should have a cash flow forecast that predicts future cash inflows and outflows and calculates your net cash position. This is the best tool for spotting warning signs that your cash flow is deteriorating or there are one-off expenses that will drain your cash reserves.
“Your cash flow forecast should be either a 12-month or 13-week rolling forecast depending on business needs. Accounting software such as Xero now has functionality to prepare a basic cash flow forecast based on prior months’ entries and is a good place to start if you don’t have one.
“These are typical cash flow warning signs I see across most businesses:
- Debtor balances increasing and average age extending – customer late payments are a major drain on cash flow
- Extended payment terms stipulated by large customers
- Long project work that is only invoiced at completion
- Requirement to purchase large amounts of inventory
- Quarterly BAS and superannuation payments – always keep cash reserves
- Growing headcount that takes time to contribute to performance
“Each of these signs must be factored into your cash flow forecast to ensure that you can see their impact on future cash balances and take action before it is too late.”
Greg Wilkes, CEO of Develop Coaching
“Let’s be honest most construction companies don’t fail because they can’t win work. They fail because they run out of cash. I’ve seen good businesses with full order books collapse simply because the warning signs were ignored.
“Think of cash flow like fuel in your van. It doesn’t matter how many jobs you’ve got lined up, if the tank’s empty, you’re not going anywhere.
“Here are three red flags you need to watch:
- Late payments piling up – If your debtor days are stretching beyond 30, you’re funding someone else’s project.
- Robbing Peter to pay Paul – Juggling supplier bills to cover wages is a classic sign you’re on thin ice.
- No clear forecast – If you don’t know what’s coming in and going out in the next 90 days, you’re driving blind.
“Action Steps (in short):
- Keep on top of payments owed.
- Don’t juggle bills—fix the root issue.
- Always know your 90-day cash position.
“Cash flow problems don’t happen overnight. Spot the signs early, take control of your numbers, and you’ll protect not just your profits; but also, your freedom to grow without the constant stress of running on empty.”
Sean Dunne, Owner | Founder, Dominium Capital
“For entrepreneurs, “growth” often feels like the ultimate measure of success. But growth without healthy cash flow is like trying to grow crops without water — eventually it withers.
“Many businesses only realise trouble when the bank account runs dry, but warning signs usually appear much earlier:
- Rising receivables – clients taking longer to pay.
- Supplier pressure – juggling bills or extending terms.
- Over-reliance on overdrafts/credit – using finance to cover daily expenses.
- Seasonality squeeze – no buffer for quiet periods.
- Timing mismatch – expenses upfront, revenue weeks or months later.
“A trap to avoid: you can be “profitable” on paper yet face cash flow problems. Profit is about what you’ve earned; cash flow is about when you actually receive it.
“One simple test: ask, “For every dollar in, how many go out?” Many owners can’t answer.
“Spotting these patterns early lets you renegotiate terms, adjust pricing, build reserves, or revisit growth plans before a cash crunch forces reactive decisions. The entrepreneurs who thrive aren’t just great at winning business – they’re disciplined about managing cash.”
Michael Russell, Managing Director at Finwave Finance
“Cash flow problems rarely appear overnight, they build slowly, then hit suddenly! The most stable businesses aren’t the ones that never face shortfalls, they’re the ones that spot the warning signs early.
“At Finwave Finance, we often see clients come to us only once pressure hits. But there are clear signals every SME should watch for:
- Delayed invoicing – If your team is slow to bill, it’s a leading indicator of cash tightness ahead.
- Stretching supplier terms – Often paying late suggests your buffer is shrinking.
- Dipping into GST or BAS funds – Using tax money to cover day-to-day costs is a red flag.
- Over-reliance on one client – If losing one account would derail your operations, you’re exposed.
- Too many “pending” payments – A backlog of unpaid invoices is not future income, it’s future risk.
“The most effective habit? A rolling 13-week cash flow forecast. It’s simple, powerful, and gives you visibility before a shortfall becomes a crisis.
“Don’t wait for the bank balance to drop. The best SMEs manage cash flow with the same urgency they give to sales.”
David Ogilvie, Founder of OgilvieAI
“Cash flow is the lifeblood of any business, yet 82% of Australian businesses fail due to cash flow problems.
“Critical Warning Signs to Watch:
- Late-paying customers represent one of the most dangerous red flags.
- Increasing expenses without corresponding revenue growth signals trouble ahead. Companies can double sales and almost go broke, due to poor cash flow planning.
- Recurring negative cash flow over multiple months indicates your business is spending more than it earns.
- Excessive inventory levels often go unnoticed as a cash flow killer. Many business owners don’t realise that inventory ties up significant working capital, typically representing one of the largest components of a company’s cash requirements. This is represented by your inventory turns. If your turns are between 3 and 10 then you have millions that can be released. If you are not measuring these regularly then you have more to gain.”
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