The RBA lifted the cash rate 25bps to 3.85% on 3 February 2026, on the back of inflation remaining strong (3.4% in the December quarter).
The concerns we hear from small business are broadly around cash dropping (discretionary spending dropping and businesses tightening up payments) and the cost of debt rising (overdrafts, financing equipment).
We covered the broader 2026 finance trends separately. Today I want to cover what you can do this week.
The key focus to help with both those concerns is cash flow management, and “cash is king” is rightly touted a lot. There are 4 factors that you can reasonably affect that will adjust your cash flow management.
- Invoice speed / WIP – the time it takes you to invoice after goods and services rendered,
- Debtor days – the time it takes your customers to pay you,
- Creditor days – the time it takes you to pay your suppliers,
- Lumpy obligations – Taxes, GST, Super.
There’s a risk when managing these – paying creditors late or chasing debtors earlier can create tensions and smoothing out lumpy payments affects cash availability in the short-term.
We recommend focussing on 1-2 policies you can change at a time, to measure their actual impact and review if it’s better for your business.
I’ve listed the 2 areas that I believe are most appropriate for most businesses
1) Debtor Days – Receivables discipline becomes non-negotiable
The time it takes to get paid and the consistency of that time is a massive financial stress, it’s also an easier adjustment to make. For many businesses that fund the costs of the work before being paid, the longer payment takes the more rate rises affect you.
What to do:
- Invoice immediately (same day the job/milestone is hit).
- Consider interim invoicing on longer jobs or deposits on larger / material intensive jobs.
- Shorten terms where you can and regularly chase all debtors.
- Review terms with habitual late payers.
- Check your debtor days (formula below) and track it. The lower the number the better, with as close to your payment terms as possible being the goal.
Xero will calculate your debtor days in analytics or your business snapshot, but if you need to do it yourself check (for the month):
(closing debtors + opening debtors) ÷ 2 = average debtors
(Average debtors ÷ Sales for month) x days in the month
For instance, if your debtors were $5k at the start of the month, and $22k at the end of the month, and you invoiced $25k for January, you should:
($5 + $22) ÷ 2 = 13.5
(13.5 ÷ 25) x 31 = 16.74 -> debtor days
If you’ve got 14-day payment terms, this is a good number. Different industries will have different average days and different levels of leeway.
2) Cash runway becomes the main control point
On a daily basis you want to be able to check your bank account and see if it’s healthy. Now is a great time to revisit that number and make sure it’s accurate.
What to do:
- Calculate runway weekly: cash available ÷ average weekly net cash outflow
- Consider what’s an appropriate runway – for some businesses 3 months may be required, for others only 3 weeks. What would happen if?
- payments arrive 2–3 weeks later than planned
- margins compress (discounts, overruns, or rework)
- Set a lower limit – once you get below this number, your focus shifts to maintaining your bank balance.
Regularly reconcile your books (10 mins a day):
- Reconcile bank transactions
- Review aged receivables and chase
- Review upcoming bills and commitments
- Decide actions (accelerate AR, pause discretionary spend, stage non-critical outflows)