8 Ways to Improve Business Cash Flow

Most businesses don't fail because they're unprofitable.

They fail because they run out of cash.

As the great Michael Dell said:

Worth remembering, right?

Here are 8 ways to improve business cash flow:

1. Track where your money's actually going

Think of your cash flow like a leaky bucket.

Money drains out through tiny holes you don't even notice.

Example: You've got 10 staff but somehow you're ordering 100 packets of cookies monthly?

That's a leak. At Douglas Loh & Associates, we'll spot it and help you fix it.

2. Use contractors instead of full-timers (where it makes sense)

Hiring permanent staff isn't cheap. Beyond their salary, you're paying EPF, SOCSO, EIS, leave entitlements, bonuses, and compliance costs.

That's an extra 20-30% on top of base pay.

Contract workers give you flexibility. You pay for actual work done, nothing more.

Bonus: If they earn under RM40,000 annually, they don't pay personal income tax either.

3. Don't invoice until you're ready

Many businesses get stuck because they don’t realise this:

Tax liability kicks in the moment you issue an invoice.

Not when payment arrives. Not when work is done. It’s when you invoice.

If you invoice too early, you're paying tax on money you haven't collected yet.

If you want to improve business cash flow, follow this approach:

• Send a proforma invoice first (basically a detailed quote)

• Issue the real invoice only after you've confirmed payment

• Tax gets triggered after cash is actually in your account

This strategy also works at financial year-end. Delay invoicing to next year if it helps smooth out your revenue and preserve liquidity.

4. Withdraw profits through dividends

Most business owners forget this option exists.

After your company pays corporate tax, what's left becomes retained earnings.

That money belongs to you as a shareholder.

When you take it out as dividends, it's tax-free in your personal hands (corporate tax was already paid).

It's a clean way to access trapped cash without extra tax consequences. Need help with it? Chat with us now:

5. Don't let money sit idle

Cash sitting in your current account earns nothing.

Put it to work:

• Fixed deposits

• Money market funds

• Low-risk, liquid short-term investments

Even 2-3% annual returns add up when you're dealing with RM100,000+.

6. Stop overpaying your taxes

One of my clients miscalculated his tax installments for years.

As a result, he overpaid massively. LHDN ended up owing him RM93,000.

But instead of refunding him, they launched an audit.

Overpaying isn't "being safe" — it creates headaches.

Huge overpayments flag audits, which lock up your money for months or years.

Plan your quarterly tax payments properly. Pay what's owed, not a sen more.

7. Don't rush to record mystery deposits

If you find random money shows up in your account, don't immediately log it as income.

First, trace it back to an actual invoice or transaction. Because recording it incorrectly could trigger tax on money you didn't actually earn.

Better approach:

• Park it under "unidentified deposits" temporarily

• Investigate the source

• Record it properly once you've confirmed what it is

8. Keep your books honest with reality

Your financial records should mirror what's actually happening in your bank account.

Some businesses record sales the second they invoice (even if unpaid), but only record expenses when cash goes out.

That creates a mismatch. Your books show "profit" that doesn't exist in real life.

That phantom profit messes with your cash flow planning.

Fix it:

• Only record income when cash actually arrives, OR

• If you're using accrual accounting, be consistent with both income AND expenses

• Bottom line: Your accounts should reflect actual cash movement

These details are easy to miss when you're juggling everything yourself.

That's why having a strategic accountant matters.

Not someone who just enters numbers. Someone who thinks ahead, catches mistakes before they're expensive, and understands where your business is going.

At Douglas Loh & Associates, we don't just manage your spreadsheets. We also help you build a business structure designed for sustainable profit and growth, not just tax compliance.

Want to see how we can help you keep more of what you earn? Let’s chat: