What’s Your Balance Sheet Hiding About Cash Flow?

It usually starts with that quiet, creeping doubt. You’ve landed a few solid clients. Sales look decent. Yet, there’s that nagging feeling you’re always playing catch-up with cash. You’re not alone. Many SMEs run lean. But what if the real issue isn’t your sales pipeline, or even your P&L? What if the answers have been hiding in plain sight—on your balance sheet?

The Silent Storyteller: Your Balance Sheet

When most business owners think about money, they look at their bank statement or maybe their profit and loss statement. However, the balance sheet holds the real secrets.

Your balance sheet shows what you own, what you owe, and what’s left over. It also quietly reveals the underlying health of your cash flow. More often than not, the signs of a cash squeeze appear here first.

Cash Poor, Asset Rich? That’s a Problem

Let’s jump to a scenario we see too often: businesses that look strong but can’t make payroll without juggling creditors.

They’ve invested heavily in assets—equipment, vehicles, even office space. But now, those same fixed assets are locking up their liquidity and the benefits of investing may not be immediate. Cash is tied down, and revenue can’t keep up with repayment obligations.

This is a classic balance sheet issue: the business isn’t underperforming—it’s overcommitted.

So, what can you do?

Case Study: Dynamic cash flow visibility: how to turn uncertainty into financial predictability

Collect your cash

Take a look at your receivables. Chances are, while you’ve been busy making money, you may not have paid as much attention to receivables. If people owe you money, give them a call and ask them to pay it.

Spending: Delay or Reduce?

Check your spending habits. Not all spending appears on the P&L. That new van? It’s on your balance sheet, but it drained cash all the same.

If things are tight, the first move is to defer spending. Don’t commit cash unless it’s critical. Can a project wait three months? Can that equipment lease be renegotiated?

Sometimes, that’s not enough. Then you need to reduce spending. Look for leaner alternatives. Could you share resources with a partner business? One smart café owner we know lets a meal-prep start-up use their kitchen at night—extra revenue for the café, and lower setup costs for the start-up. Yes, that shows up on the P&L but the impetus is and was clever balance sheet management.

Learn how BridgePoint Group accountants have what it takes to fuel your growth.

Time to Talk Capital? Know Your Options

Once you’ve collected, cut or deferred what you can, but still face a cash flow squeeze, it’s time to look at raising capital. But don’t just grab the first loan that comes your way. Each funding method impacts your balance sheet differently—and knowing the difference matters.

Raising Debt: The Short-Term Fix

Debt can be a lifeline—if it fits your cash flow profile.

Bank loans, equipment finance, or inventory loans can help you match cash out with cash in. Say you’re buying stock you’ll sell in 90 days. A short-term loan makes sense. But only if you’re profitable and confident about repayment.

Debt, however, is a double-edged sword. It must be repaid, with interest. It gives you spending power now but it increases your liabilities.

Need breathing room without selling assets? Consider refinancing existing assets instead of liquidating them. That way, you release cash without compromising operations.

Equity Capital: The Long-Term Play

Debt’s not always the answer. If your business is growing fast but chronically short of cash, you might be under-capitalised.

That’s when equity becomes the smarter move. It brings in cash without the burden of repayment. But there’s a trade-off—you’ll give up a share of ownership.

Still, if you know exactly how you’d spend that extra $500k, and you can prove your model works, investors might see the opportunity too. Equity funding strengthens your balance sheet and helps fuel sustainable growth—if used wisely.

Remember: equity is relatively risky and therefore relatively expensive. Investors expect a return, and they’ll ask the hard questions. Be ready.

When Cash Flow Problems Are Really Capital Structure Problems

Here’s the twist most business owners don’t see: cash flow issues often aren’t operational—they’re structural.

If your pricing is sound, margins healthy, and sales steady, but you’re still gasping for cash, something deeper’s going on. Your balance sheet is trying to tell you that the way your business is funded—or how it spends capital—is misaligned.

In that case, no amount of budgeting or chasing late invoices will fix the root cause. You must address your capital structure.

Where to From Here?

The truth is, solving a cash flow crunch means looking past your cash flow statement. You need to interrogate the balance sheet and ask the uncomfortable questions:

• Are you over-leveraged?
• Are your assets dragging down liquidity?
• Have you raised enough capital—or the right kind?
• Is your strategy realistic based on your financial position?

In business, cash isn’t just king—it’s the air your business breathes. But cash flow doesn’t live in isolation. It’s the consequence of your business decisions, and many of those show up on the balance sheet. If your balance sheet is looking a little lopsided, don’t wait for the oxygen to run out.

If you need to discuss effective cash management or you would like to better understand the trinity that is your P&L, balance sheet and cash flow, then reach out to our accounting team and see how we can help you.