Cash(flow) is always king / a mystery to me / my worst nightmare

Fairly certain we all have used combinations of this phrase and probably seen/read/discussed many different explanations as to what it actually means to a business. Terms like “cash liquidity”, ‘cash-flow management”, “cash burn rate”, “average debtor/creditor days” do not make it easy to understand why your business never seems to have enough money in the bank for payments to suppliers and employees, but looks like it is really profitable!

Here are my ABCs to get every small business closer to unravelling the puzzle

A. What is cash-flow?

Starting Cash Balance + Money InMoney Out = Ending Cash Balance

Let me break it down in 5 points:

  • Cash-flow is measured within a time period, usually 1 month
  • A business typically has a starting balance of cash at bank and an ending balance of cash at bank (it is either zero or a positive number).
  • If the total amount of Deposits into your bank is MORE than the total amount of Payments that actually exits your bank within a given time period, this is GOOD, or POSITIVE cash-flow.
  • If the total of amount of Deposits into your bank is EQUAL to the total amount of Payments that actually exits your bank within a given time period this is NEUTRAL cash-flow.
  • If the total of amount of Deposits into your bank is LESS than the total amount of Payments that actually exits your bank within a given time period this is BAD, or NEGATIVE cash-flow.

Common misunderstandings:

  • Sending a sales invoice to a client only is a request for customer payment– it does not mean you are instantly receiving money. Generally speaking, this is the area where you have least control in a business, however there are plenty of incentives, payment methods or even short term financing which can be deployed to help your business receive cash more quickly.
  • Receiving an invoice from a supplier is only their request for payment– it does not mean you are instantly paying money. Generally speaking, this is the area where you have the most control in a business, however you need to manage your supplier expectations and not be late on payment too often.

Key Indicators:

  • Sustained POSITIVE cash-flow over multiple periods is a where most businesses want to be – it means you have cash to expand, pay bonuses, repay investors (or yourself).
  • Sustained NEUTRAL cash-flow over multiple periods means that your business is just treading water/surviving.
  • Sustained NEGATIVE cash-flow over multiple periods is where most businesses want to avoid – it means that you are paying more cash out than you are receiving in (or cash burn rate)

B. What is cash-flow forecasting?

In a nutshell, this is the art of estimating:

  • How much cash the business will RECEIVE as deposits (from sales or other sources) in future time periods (e.g. next 3 months) and;
  • how much cash the business will be PAYING (for suppliers or capital expenditure) in future time periods (e.g. next 3 months).

C. What is cash-flow management?

ABCs are not meant to be rocket science – 5 key points to note for beginners

  1. Identify Your Cash Break-even Point (cash-flow NEUTRAL), or Cash In = Cash Out. Being able to balance this equation is a simple measure of business success.
  2. Optimise your Accounts Receivables – minimise delays between payments by tightening credit terms (reduce to net 10 versus net 30/60) and/or offering solutions/incentives for faster customer payments
  3. Extend your Accounts Payables – do the exact opposite of accounts receivables! When negotiating with various vendors, maximise your payment terms where possible to net 30/60 or slice up your payments into monthly instalments – all helps your cash-flow
  4. Be A Smart Spender – identify those expenses which are directly correlated with Put simply, separate into Need vs. Nice-To-Have buckets! For example, online store owners will need an integrated inventory management and payment gateway solution. It may be resource and time intensive but is absolutely necessary if you want to gain business transparency and take payments! Definite NEED!
  5. Keep a Cash Reserve – having a buffer helps you easily navigate out of those unexpected disasters that will happen during your venture. I suggest keeping a minimum of three to six months of OPEX (basic operating expenses like rent, payroll etc) reserve at ALL times. If you dip into the reserve, ensure you replenish!

Necessary Actions:

  1. Checking your starting balance of cash at bank, then
  2. Forecasting what you will receive and pay out, then
  3. Assessing what you actually received and paid out, then
  4. Checking your closing balance of cash at bank, then making a decision on whether your cash position is viable.
  5. Repeating the above steps for the next period.

Step 4 is where the real decision making kicks in – what to do next?

Is your cash hiding in inventory, WIP, debtors?

Take a business loan? Take a shareholder loan?

Look for investment?

Drop us a message if you want to discuss any of the above and how we can provide insight to manage your short-term cash-flow better.

Just to make a final point – there is NO SUCH THING as a silver bullet for conquering the cash-flow beast.

Make learning the ABCs Habitual. Make it Essential.

Just like checking your smartphone the first thing you wake up.

1Original article appears here


Outsource your accounting department


    News: Regional coverage | Low-touch accounting | Shopify, Stripe & Paypal Automated Accounting

    First an apology for a long hiatus – writer’s drought, father of two, World Cup, craft beer, personal training…choose an excuse that you find palatable.

    And if those aren’t to your liking, here’s a summary of what we’ve been working on behind the scenes:


    Regional coverage

    I am pleased to announce that we have opened an office in Singapore April 2018, headed by our very capable director Kin Seng, supported by a combination of our favourite “robots/software” and existing, amazing but lean HK team.

    Our footprint now includes Malaysia, where we have been able to source awesome accounting talent that can communicate in English, Chinese (Cantonese/Mandarin) and other Asian dialects to better support our existing team and most importantly, our international client base.

    Off the back of our extended coverage, we are now known as Cornerstone Management Group Asia – pretty original I know (still an accountant deep down).


    Low-touch accounting

    In celebration, we are launching a low-touch accounting solution geared towards digital consultants, marketers, agencies – businesses which do not sell physical products and/or hold stock inventory.

    The solution is powered by our bots, programmed and reviewed by Cornerstone logic – it allows clients to easily get their bills/expense receipts to us at Cornerstone through 3 channels:

    • Phone App – take a picture with the app. Yes, it’s that easy.
    • Desktop – drag and drop into the RB app through web browser.
    • Email – email the attachment to a dedicated address

    Our team takes care of the rest and the bill/expense is booked to Xero.

    Get in touch with us at to find out more.


    Shopify, Stripe, Paypal high-volume automated sales/payments reconciliation

    We’ve also built an automated reconciliation software for high-volume e-commerce operators that run on Shopify, Stripe and Paypal.

    Put simply, we can reconcile up to 1000s of Shopify orders per day to Stripe/Paypal payments in seconds – and then auto post to Xero for daily reporting.

    SKU codes from Shopify are sync’d through so you’re covered for automated COGS/Inventory journals and gross profit calculations!

    Designed with an open API so it can also talk to other softwares and/or marketplaces (e.g. inventory management, Lazada), although this will require further development.



    Amazon Marketplace Xero accounting add-on

    We haven’t forgotten about Amazon sellers – a really cool app has been in our testing labs for a while and until we felt that it had reached Cornerstone’s standard of accounting integration maturity, we held back – so we’re happy to recommend using A2XAccounting ( to integrate Amazon Marketplace sales, fees, COGS and FBA Inventory to Xero.



    Still under wraps in our labs is a Xero integrated, customisable, model-driven, 3-way forecast dashboard that we are building to improve our engagement with you, our clients. We see that our value going forward, is to help you navigate the uncertain future, rather than just talking about the past.

    Get in touch with us on or contact me directly to find out more.



    Outsource your accounting department


      Interview with Adrian Lai on The Asian Entrepreneur

      Adrian Lai is helping SMEs work smarter whilst juggling fatherhood in Hong Kong.

      What’s your story?
      I’m an ex-banking finance guy that jumped off the hamster wheel and left the cage. I started up a small advisory firm serving SMEs looking for smarter, more efficient ways to do business. I am now juggling all this with being a new dad, just to add a little more variety.

      What excites you most about your industry?
      If anything needs an enema (read revamp), it’s the accounting, compliance and commercial banking sector in Hong Kong. These three are just ripe for disruption with new technology and redefinition of client servicing.

      What’s your connection to Asia?
      I was born in Hong Kong but grew up in Australia. I visited every summer holidays in my youth and it just feels like my second home.

      AdrianSmall Logo

      Favourite city in Asia for business and why?
      Hong Kong – the clash of “old school meets new school” makes people stop and ask, “Why am I still doing things the same way?” This to me, is the perfect petri-dish for cultivating an entrepreneurial spirit.

      What’s the best piece of advice you ever received?
      Find the thing(s) that you fear the most and you have found your master.

      Who inspires you?
      My fellow startups and business owners.

      What have you just learnt recently that blew you away?
      My 13 month old daughter just learnt how to sign please and thank you.

      If you had your time again, what would you do differently?
      Nothing – it’s all good.

      How do you unwind?
      Relaxed drinks, banter and cooking my own version of tapas – all with friends.

      Favourite Asian destination for relaxation? Why?
      I just went to Da Nang and it’s my new favourite. Good food, friendly people and a nice mix of resort and big city feel that caters for any mood.

      Everyone in business should read this book:
      The Art of War.

      Shameless plug for your business:
      Cornerstone HK is a trusted business partner for SMEs in Hong Kong specialising in B2C+B2B cloud solutions for retail, e-commerce and inventory/order management. Accounting/Advisory + Xero add-ons + Web Design/E-comm We leverage best-in-class Xero add-ons to streamline your operations and make running your business both fun and compliant. Focus on your business – we’ll take care of the rest.

      How can people connect with you?
      Find me on

      Twitter handle?

      This interview was part of the Callum Connect’s column found on The Asian Entrepreneur:

      CallumConnectsCallum Laing invests and buys small businesses in a range of industries around Asia. He has previously started, built and sold half a dozen businesses and is the founder & owner of Fitness-Buffet a company delivering employee wellness solutions in 12 countries. He is a Director of, amongst others, Key Person of Influence. A 40 week training program for business owners and executives.

      Take the ‘Key Person of Influence’ scorecard <>

      Connect with Callum here:
      Get his free ‘Asia Snapshot’ report from

      Callum Laing

      Callum Laing has started, built, bought and sold half a dozen businesses in a range of industries across two continents. He is a partner in the Private Equity firm Unity-Group. Co-founder and non-exec director of The Marketing Group PLC and is CEO of Key Person of Influence (Asia). He is author of ‘Progressive Partnerships’.