A Healthy Bank Balance Doesn't Always Mean Healthy Cash Flow

Imagine a strata scheme has $180,000 in the bank.

At first glance, the scheme appears financially healthy.

Suddenly, that $180,000 bank balance tells a very different story.

This is why year-end financials shouldn't only be viewed as a record of what happened. They can also help management and committees understand what may be coming next.

1. Cash in the Bank vs Available Cash

A bank balance is one number. It doesn't necessarily represent the amount available for everyday expenditure.

Some funds may already be allocated to future capital works, while unpaid invoices, upcoming insurance premiums, contracts and planned maintenance may create additional commitments.

Instead of asking:

Consider asking:

2. Understand Budget Variances

A budget variance is useful, but the number itself doesn't always explain the situation.

If repairs and maintenance exceeded budget, was it because of an unexpected one-off repair? Were contractor costs higher than anticipated? Or is the scheme experiencing an ongoing increase in maintenance costs?

Understanding the reason behind significant variances can help make the next budget more realistic.

3. Are Current Levies Still Adequate?

Costs rarely remain static.

Insurance, utilities, cleaning, gardening, maintenance contracts and other operating expenses may increase over time.

Year-end accounts provide an opportunity to compare actual expenditure with levy income and consider whether current contribution levels remain appropriate for expected expenditure.

4. Look at Capital Works or Sinking Fund Readiness

A large fund balance can look reassuring when viewed in isolation.

The more important question is whether that balance is sufficient for the projects expected over the coming years.

Planned painting, roofing, lifts, structural repairs, common-property upgrades and other major expenditure can quickly change the financial position.

Comparing the fund balance with known and anticipated projects provides a much clearer picture.

5. Look 6–12 Months Ahead

Historical financial reports tell us what happened. Good financial management also considers what is coming.

• When is the next insurance premium due?
• Are major contracts being renewed?
• Are utility costs increasing?
• Are significant repairs or projects planned?
• Are levy arrears increasing?
• Could large expenditure create temporary cash-flow pressure?

Looking ahead allows management and committees to discuss potential issues before they become urgent.

Closing the Books Is Only the Beginning

Accurate year-end accounts are essential, but their value goes beyond compliance and reporting.

Once the numbers are clean, they can help identify trends, anticipate expenditure and support better financial conversations.