Business Basics: A lesson in Cashflow statements

23 August 2021

Whether you’re a sole trader looking to improve your business finances, or just starting out in a small business, understanding cashflow statements should be top of your priorities list.


Not everybody’s comfortable working with numbers and coming to terms with financial statements can feel overwhelming for many freelancers and new business starters.


Cashflow statements are a great example of this because they’re also one of the most important types of statements to get your head around. We here at Gunson McLean, coach you through these so that you truly understand how your business operates.


This article will cover:

  1. What is a cashflow statement and why you need one
  2. How to create a cashflow statement
  3. Ways to use your cashflow statement


Learning to read cashflow statements will offer you an insight into the health of your business at any one time, which is an important first step to being able to create a cashflow forecast. Let’s start from the top.

Cashflow statements: What are they and why do they matter?

Firstly, a cashflow statement is one of three financial statements used to provide information about a business. You may also have heard of the balance sheet or a profit and loss statement.


Like the way a business plan helps provide an overview of your offering, financial statements can provide a similar snapshot of the monetary side of your business.


A cashflow statement shows us how much cash is moving in and out of our business over a certain period. A business owner needs to know if there is enough cash in the business to pay expenses. This statement is the one to help you determine this.


Depending on your business, a cashflow statement can be for any particular time period, but monthly statements are most popular. A monthly cashflow tells you how much money the business has at the beginning of the month, money that came into the business during that time and money that went out of the business.


The cashflow statement is sometimes called the ‘honest form’ for depicting how your business is going. This is why cashflow statements are so important to business owners: they put the reality of a business in black and white.


You may have heard the term ‘cash is king’. It refers to having positive cashflow in your business — in other words, having more dollars coming in than going out. For this reason, a cashflow statement allows the business owner to answer these basic questions:

  • How much cash has come in?
  • How much cash has gone out?
  • What needs paying?
  • Can I afford to pay what I need to pay?


Cashflow statements will also be useful when it comes to seeking further funding, as it’s one of the chief documents an investor or bank will want to see.


Producing a cashflow statement

The most common way businesses produce cashflow statements is through accounting software, like Xero and MYOB.


The reason for this is that accounting software allows you to set up your financial information once and have it update on the go. With the full benefit of mobile devices and the internet, invoices and receipts can all be secured and accounted for with the tap of a finger.


A more traditional approach will require you to take detailed records of your business transactions before laying them out in a spreadsheet, potentially adding hours to your workday and greatly increasing the risk of errors.


Like any business report or plan, it’s vital to understand what the financial statement or report is telling you, and that means going over it in detail. And, when in doubt, you’ll need someone who’s an expert in business finances to help clear things up. It’s never too early or too late to consult with an advisor.


Making the most of your cashflow statements

The power of the cashflow statement lies in its ability to reveal how much cash you will need at any given time in your business.


Getting into the habit of running this kind of business report will help you work out what your expenses are and when you need to pay them over longer timeframes. It then becomes a tool for you to identify any red flags that could hamper your growth, or make it hard to pay for staff or suppliers, for example.


By heeding these warning signs, you help avoid future financial trouble and create a reliable, more sustainable business in the process.


As you begin to invest more into gaining clients or expanding your operation in some way, you’ll do so with confidence knowing exactly what you’re able to afford.

The art of delegation

11 August 2025
How often do you get to the end of a working day and wonder where the time went? Perhaps you never got to item 3 (or even item 1!!) on your to-do list. How can you solve this problem without working longer hours? The answer is very simple, but the art in the solution is where the gold is. The answer to free up time is to delegate more – either to existing team members, new people you recruit, or externally to outside contractors. However, if delegation were that easy, everyone would be doing it now, right? So, what is the art of delegation? We say art, because delegation is not an exact science; different approaches are needed depending on who the ‘delegate’ is. Time and effort are required to effectively pass on tasks to others. Often, the time the delegator needs to put in initially is greater than if they did the work themselves – that’s why so many people don’t delegate. The view that ‘it’s quicker for you to do it yourself’ holds you trapped and unable to be more productive and effective yourself. It also stops others from developing better ways to do things than you already know, i.e. if you teach them your way, then they can master that AND add their own value – two minds being better than one. Here are some essential principles to apply to help you to delegate (as opposed to abdicate!): Delegation Assess the task, issue to the right person and support - helps build trust and respect Be specific and crystal clear for greater communication Request they repeat back instructions, so you know you were understood, enabling higher productivity Set a time frame and request clarification that the task has been achieved, ensuring jobs are completed on time and are profitable Both parties to review - opens the door for future work Abdication Issue tasks to anyone and forget about it - shows distrust and a lack of respect Giving unclear and little information results in poor communication Don’t ask if you were understood - results in low productivity Don’t set a time frame – it can mean jobs are delayed and over budget Different expectations can result in disgruntled clients No review results in no future work Delegation is a skill to be learned; applying these principles consistently will ensure long-term success. “No person will make a great business who wants to do it all himself or get all the credit” – Andrew Carnagie Action list: Which tasks am I currently doing that I could delegate to others? What can I do with the time I free up? Who are the best people for me to delegate these to? (Make sure they want to do these as part of their career development). What is the best way to document what is expected and how it should be done? What support and review process is needed to ensure success?

Work vehicles? Stay on top of tax with logbooks

11 August 2025
Logbooks are useful records of business expenses relating to work vehicles and this is important when calculating what tax deductions you can claim. Depending on your business entity type, different tax rules apply when you use motor vehicles to earn income, and you might use a logbook to track expenses in different ways. Sole traders and partnerships can claim income tax deductions for motor vehicle expenses if the vehicle is used to help earn income for the business. If you don’t use the vehicle exclusively for business, you can’t claim 100% of vehicle expenses. You need to work out the business use of the motor vehicle to calculate what deduction you can claim. You can do this either by using a logbook to track actual costs or using a logbook over a test period to establish the average business usage. Companies are a bit different. Where company vehicles are used partly to earn income and partly for private use, vehicle costs associated with private use are liable for FBT. Companies can use logbooks to keep track of work-related costs and show either that the vehicles are work-related vehicles which don’t attract FBT where used for work purposes only, or that FBT is accounted for correctly where there is some private use of other vehicles. The logbook becomes a record of work-related use and of private use subject to FBT. Where a company restricts private use of the vehicle, a logbook is used as evidence that employees have complied with the restriction. Whatever type of business structure you have, we can advise you on keeping good records and understanding what you can claim.

Changes to KiwiSaver: How to get your business ready

11 August 2025
Major changes to KiwiSaver were announced in Budget 2025. The KiwiSaver voluntary savings scheme is aimed at helping New Zealand workers save for retirement or buy a first house. But with the rising cost of living, action was needed to make KiwiSaver fit for purpose and more fiscally sustainable as a savings scheme. How will these changes affect your employees and your small business? Let’s take a look at the details of these KiwiSaver changes. Changes affecting your employees First off, let’s outline how the initial changes announced in Budget 2025 will affect your employees and other Kiwi workers: Since 1 July 2025: Younger workers will qualify for government contributions: People aged 16 and 17 will qualify for government contributions, so long as they meet other eligibility requirements. Prior to 1 July 2025, members must be 18 or older to qualify. Government contributions to halve: The government KiwiSaver contribution will halve, reducing the maximum government contribution from $521.43 to $260.72 each year. High earners to lose government contributions: People who earn more than $180,000 of taxable income in a year will no longer qualify for government contributions. No change to 2025 government contributions: There’ll be no change to government contributions for the year ending 30 June 2025. These will be paid in July and August at the current government contribution rate. Changes affecting your small business Next, let’s lay out the KiwiSaver changes that will directly affect your business: From 1 April 2026: Employer contributions will rise to 3.5%: From April 2026, the default KiwiSaver contribution rates for both employers and employees will rise to 3.5% – up from 3%. Employees can choose to remain contributing at 3%: Employees who are members of the KiwiSaver scheme will be able keep their contributions at the current rate. They can apply for a temporary rate reduction from 1 February 2026, if they want to continue contributing at 3% from 1 April 2026. Employers can match the rate reduction: As an employer, you’ll be able to match your employee’s temporary rate reduction. Once your employee moves to a higher contribution rate, you’ll need to increase your employer contributions to the default 3.5% rate. Inland Revenue will notify you of this change. Younger workers will qualify for KiwiSaver contributions: People aged 16 and 17 will qualify for employer contributions. If they contribute to KiwiSaver from their wages, you will need to start making employer contributions. From 1 April 2028, the default contribution rates for employers and employees will rise again to 4% (up from 3.5%). Getting ready for the KiwiSaver changes These amendments to KiwiSaver could have a significant impact for your small business. Increased employer contributions will increase your payroll costs and stretch your cashflow, as will making contributions for younger workers in the 16 to 17-year-old age bracket. You'll also need to update your payroll software and processes, to ensure you’re making the correct contributions for the right people, at the right rates. 
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