My life lesson: everything depends on cash flow

Entrepreneur Jan Owen quickly realised success depended on how she handled her money day to day. By Sylvia Pennington.

Hard-nosed advice that "cash flow is king” from her commercially savvy father-in-law two decades ago helped entrepreneur Jan Owen ensure the social enterprises she’s founded continued vital work by staying on firm financial footing.

Currently chief executive officer of the Foundation for Young Australians, an organisation that creates opportunities for and gives support to young Australians in acquiring skills they need to succeed in the changing world of work, Owen is the daughter of Lifeline counsellors who taught her change begins with individuals taking action.

In 1993 she founded CREATE Foundation, the national consumer body for children and young people in out-of-home care and, prior to joining the foundation, was at the helm of Social Ventures Australia, which aims to improve the effectiveness of the Australian social sector.

“Back when I was in my early thirties I was meeting with the board of one of my first start-ups,” Owen says. “I had already run a small business but when the board asked me for a cash flow projection, I had no idea what they were talking about!

“I left the room and went straight to the phone to call my father-in-law for advice. Having been a very successful businessman, he knows money. He’s a stickler for knowing and understanding where every cent is, at any point in time.

“Within a day, and using his template, I had our cash flow statement and an understanding of why everyone who spends money, whether in a personal or professional context, needs one.”

Why cash flow is so important

ANZ financial planner Peter Hodgson concurs, saying the failure to understand where their money goes is the single biggest money mistake he sees people making. This has become even more prevalent as we’ve moved towards a cashless society. 

“It’s important to understand things like opportunity cost,” Hodgson says. “Perhaps the reason we can’t buy a house as quickly as we’d like to, or we can’t do the things that are important to us, is because we’re not managing our cash flow well enough.”

He suggests nipping over-spending in the bud by putting away the credit cards and setting a cash budget to live on each week.

Understanding money matters

For Owen, her father-in-law’s timely help changed the way she thought about money and instigated lasting appreciation of the importance of well-controlled finances.

“The first imperative for every person, family, corporation, non-government organisation or government is to be able to pay your bills on time. Fail to do that and everything – and I mean everything – goes to hell,” Owen says.

“And the only way to ensure you can do that is through sound cash flow management. Profit and loss statements (P&L) are about the past. Balance sheets are about the present. Cash flow is about the future. You can have a strong P&L and balance sheet and still be heading into a storm. Conversely, as long as your cash flow is strong, you can readily survive a bad P&L and a poor balance sheet.”

It is financial wisdom which should be imparted to the next generation, Owen believes.

“I realised I’d never been taught financial literacy, either at home or at school,” she says. “Young people today are moving into a more insecure labour market and being financially literate is going to be essential to surviving and thriving in a changing work environment.”

Owen was awarded the Order of Australia in 2000 for her services to children and young people.

This is a series from ANZ Women asking leading Australians to share important financial advice that has changed their life.