Understanding Cash Flow And Working Capital 2025 — How To Manage Business Liquidity

Cash flow—not profit—is what keeps a business alive. In 2025, rising interest rates, supply chain delays, and inflation have made liquidity management the number one challenge for small and medium-sized enterprises. Mackisen CPA Auditors Montreal designs cash flow systems that forecast, monitor, and optimize working capital to maintain financial stability.

Legal and Regulatory Framework

Income Tax Act (Canada) Section 18(9): Governs timing of deductions and accrual accounting for expenses.
CPA Canada Handbook Section 1540: Establishes requirements for cash flow statement presentation.
Financial Administration Act (Quebec): Regulates corporate financial controls and liquidity disclosures.
Excise Tax Act (Canada): Impacts cash flow through GST/HST and QST remittance timing.

Key Court Decisions

Atlas Tubes v. The Queen (2018): Recognized that poor cash flow management can invalidate certain expense claims when payments are delayed.
Groupe Pomerleau v. Quebec (2021): Emphasized proper working capital classification for tax reporting.
Tremblay Manufacturing v. The Queen (2019): Highlighted the need for documentation of related-party loans affecting liquidity.

Why CRA and Revenu Québec Examine Cash Flow

CRA and Revenu Québec audit loan accounts, shareholder advances, and deferred revenues to detect unreported income or disguised withdrawals. Negative working capital positions or frequent overdrafts often raise red flags. Mackisen reconciles all inflows and outflows, ensuring full transparency and tax compliance.

Mackisen’s Strategy

1. Cash Flow Forecasting — Prepare rolling forecasts to project liquidity needs.

2. Working Capital Optimization — Balance receivables, payables, and inventory.

3. Loan and Dividend Planning — Manage shareholder transactions to protect cash flow and compliance.

4. Tax and GST/QST Timing — Align payment cycles to reduce short-term cash pressure.

5. Performance Monitoring — Provide dashboards for real-time cash management.

Real Client Experience

A Quebec wholesaler facing cash shortages recovered stability after Mackisen restructured accounts receivable collection cycles, improving liquidity by 22%. A Montreal manufacturer reduced CRA interest penalties by managing tax remittance schedules through Mackisen’s forecast planning.

Common Questions

What is working capital? The difference between current assets and liabilities—your short-term liquidity measure.
How can I improve cash flow? Accelerate collections, delay non-essential payments, and monitor forecasts monthly.
Do CRA and Revenu Québec audit bank accounts? Yes, to verify accuracy of declared income and expenses.

Why Mackisen

Mackisen CPA Auditors Montreal are experts in cash flow forecasting, working capital management, and liquidity optimization. We help businesses maintain financial control and avoid audit risk. Call Mackisen CPA Auditors Montreal today for your 2025 Cash Flow Consultation. The first meeting is free and ensures your business stays profitable and solvent.