Cash Flow in a Slowing Economy: Why Australian Businesses Need to Plan Ahead

For Australian businesses, economic conditions can change quickly.

Rising costs, higher interest rates, inflation, weaker productivity and ongoing global uncertainty can all make it harder for businesses to predict what the next few months will look like. At the same time, expenses such as wages, energy, insurance, technology, supplies and finance can continue to place pressure on cash flow.

The challenge is not necessarily that businesses are struggling to find customers. In many cases, the challenge is having enough cash available to cover expenses while waiting for customers to pay.

For businesses operating in an uncertain or slowing economy, strong cash flow management can make the difference between simply getting through a difficult period and being in a position to take advantage of better conditions when they arrive.

Why the Economic Environment Matters for Cash Flow

Businesses do not operate in isolation from the wider economy.

Changes in government spending, taxation, interest rates, energy costs, regulation and global events can all influence business costs and consumer demand.

Australia is currently experiencing elevated inflation, with the Reserve Bank of Australia reporting that inflation remained above target in the June quarter of 2026. The RBA has also highlighted historically weak productivity growth as a constraint on Australia’s economic capacity.

At the same time, financial conditions have tightened following several interest rate increases earlier in the year. The RBA’s August 2026 assessment noted that financial conditions remain somewhat restrictive, while market participants continue to see the possibility of further rate increases.

For businesses, these conditions can translate into higher operating costs and greater uncertainty around future revenue.

This makes cash flow planning increasingly important.

Rising Costs Can Quickly Put Pressure on Working Capital

One of the biggest challenges for businesses during periods of economic uncertainty is that costs do not always rise at the same time as revenue.

A business may have customers and a healthy sales pipeline, but still experience pressure if the cost of delivering products or services increases.

For example, a business may need to manage:

• Higher wages and employment costs
• Increased energy and fuel expenses
• Rising supplier costs
• Higher insurance premiums
• Increased technology and software costs
• Higher borrowing costs
• Additional freight and logistics expenses
• Longer customer payment periods

The RBA’s business liaison program has reported that businesses across a range of industries continue to experience above-average growth in operating costs, including labour, IT, professional services and logistics-related expenses.

When these costs need to be paid before customer invoices are settled, the pressure on working capital can increase.

Energy and Global Events Can Affect Australian Businesses

Australian businesses are also exposed to events beyond their control.

Global geopolitical developments can affect fuel, energy and commodity prices, which can then flow through supply chains and increase the cost of doing business.

In 2026, the RBA has highlighted the impact of higher energy and commodity prices on Australian inflation. Higher fuel costs can affect businesses directly through transport and energy expenses and indirectly as suppliers pass higher costs through their own supply chains.

For a business already operating on tight margins, even relatively small increases across multiple expense categories can have a significant effect on available cash.

This is why businesses need to look beyond revenue and consider how much cash they will actually have available after covering their upcoming obligations.

Insurance and Other Business Expenses Can Add to the Pressure

Insurance is another cost businesses need to factor into their cash flow planning.

Premiums, levies and other operating expenses can represent significant annual or periodic commitments. When several major expenses fall due around the same time, businesses can experience temporary cash flow pressure even when their underlying operations remain profitable.

The same applies to annual software subscriptions, equipment purchases, tax obligations, supplier payments and other large expenses.

Rather than waiting until a large payment is due, businesses can use cash flow forecasting to identify these commitments in advance.

Don’t Confuse Profit With Available Cash

One of the most important principles of business finance is that profit and cash flow are not the same thing.

A business can record strong sales and generate profitable invoices while still having limited cash available in its bank account.

Consider a business that invoices a customer $80,000 with 45-day payment terms.

The business may recognise the sale, but it still needs to pay employees, suppliers, contractors, rent and other expenses while waiting for the customer to pay.

If several large invoices are outstanding at the same time, the gap between revenue and available cash can become significant.

This is particularly important during periods when operating costs are increasing.

Cash Flow Forecasting Becomes Even More Important

When economic conditions are uncertain, businesses should have a clear understanding of their expected cash position.

A cash flow forecast can help business owners identify:

• When major expenses are due
• Which invoices are outstanding
• When customers are expected to pay
• Whether upcoming commitments can be comfortably covered
• Where potential cash shortfalls may occur
• How much working capital may be required

This gives businesses more time to make decisions rather than reacting when cash becomes tight.

The goal is not to predict the economy perfectly.

The goal is to understand how different economic conditions could affect your business and prepare accordingly.

Unlocking Cash From Outstanding Invoices

For businesses experiencing a timing gap between completing work and receiving customer payments, Invoice Financing can provide another option for managing working capital.

Instead of waiting until an eligible invoice reaches its payment date, businesses can access working capital against eligible outstanding invoices sooner.

This can help provide additional flexibility for businesses that need to continue paying expenses while customers remain within their agreed payment terms.

The funds may help businesses manage:

• Employee and contractor payments
• Supplier expenses
• Stock and materials
• Energy and operating costs
• New business opportunities
• Technology investments
• Marketing activity
• Day-to-day working capital requirements

This can be particularly valuable when businesses are trying to maintain stability while navigating a more challenging economic environment.

Managing the Other Side of Cash Flow

Cash flow planning isn’t only about getting money into the business sooner.

Businesses also need to consider the timing of money going out.

Supplier invoices and other business expenses can sometimes fall due before customer payments arrive. When operating costs are increasing, paying a large expense upfront can put additional pressure on available working capital.

Having flexible payment options can give businesses another way to manage these outgoing costs.

Selectpay also has a range of payment solutions that allow businesses to spread the cost of supplier invoices and business expenses.

Buy Now Pay Later

Selectpay’s Buy Now Pay Later (BNPL) solution allows eligible business expenses to be paid through four instalments over 90 days, for a 5.99% fee*.

For businesses managing cash flow during uncertain economic conditions, spreading an eligible expense across four instalments can help reduce the immediate impact of a larger payment.

This can allow businesses to keep more cash available for other important commitments while managing supplier invoices and eligible business expenses over an agreed period.

Cash Flow Finance

Selectpay’s Cash Flow Finance provides another option for businesses looking to manage the timing of their expenses.

Businesses can pay weekly over 4, 8 or 12 weeks, with fees of:

• 2.75% for 4 weeks*
• 5.25% for 8 weeks*
• 6.5% for 12 weeks*

By spreading payments over an agreed period, businesses can better manage their outgoing cash flow while keeping funds available for other operating requirements.

This can be particularly useful when several expenses fall due around the same time or when a business wants greater flexibility around the timing of supplier and business expense payments.

Managing Both Incoming and Outgoing Cash

A strong cash flow strategy considers both sides of the equation.

On one side, businesses need to manage money coming in, including outstanding customer invoices and payment terms.

On the other, they need to manage money going out, including supplier invoices, operating expenses and other business commitments.

This is where having access to different cash flow solutions can provide greater flexibility.

Invoice Financing can help eligible businesses access working capital tied up in outstanding invoices.

Buy Now Pay Later can help businesses spread eligible expenses across four instalments over 90 days.

Cash Flow Finance can allow businesses to pay weekly over 4, 8 or 12 weeks.

The right solution will depend on the business’s circumstances, the expense involved and eligibility.

By considering both incoming and outgoing cash, businesses can take a more proactive approach to managing working capital and preparing for periods of uncertainty.

Prepare for Better Days Ahead

Economic cycles do not last forever.

There will be periods of stronger demand, lower costs and greater business confidence. However, businesses that manage their cash flow carefully during challenging periods can put themselves in a stronger position when conditions improve.

Good cash flow management is not simply about surviving a slowdown.

It is about maintaining enough financial flexibility to continue operating, make informed decisions and take advantage of opportunities when they appear.

Businesses cannot control interest rates, global events, government policy or changes in operating costs.

But they can control how well they prepare for them.

Keep Your Cash Flow Moving With Selectpay

When customers take time to pay and business expenses continue to rise, businesses can face pressure from both sides of their cash flow.

Selectpay offers a range of cash flow solutions designed to help Australian businesses manage the timing of money coming in and going out.

Selectpay’s Invoice Financing solution helps eligible Australian businesses unlock working capital from outstanding invoices sooner, providing greater flexibility while allowing customers to maintain their existing payment terms.

For businesses managing supplier invoices and other eligible expenses, Buy Now Pay Later allows payments to be spread across four instalments over 90 days for a 5.99% fee*.

Alternatively, Cash Flow Finance allows businesses to pay weekly over 4, 8 or 12 weeks, with fees of 2.75%, 5.25% or 6.5% respectively*.

Whether you’re managing rising operating costs, waiting for customers to pay, preparing for a slower period, covering business expenses or looking to take advantage of a new opportunity, having greater flexibility over your cash flow can help your business keep moving.

Don’t let cash flow uncertainty hold your business back. Click here to learn more about Selectpay’s cash flow solutions and how they can help your business keep moving.