Constant cash flow has never been more important for SMEs

In the current climate, SMEs are facing challenges on multiple fronts, including skills shortages, tough bank lending criteria and Brexit uncertainty. While each issue requires a fresh strategy to mitigate risks and maximise returns, I believe that the key to ensuring a business survives and thrives lies in maintaining a steady cash flow.

Contemporary cost concerns

The political deadlock around Brexit has already had a real impact on UK SMEs. At the end of 2018, consumer confidence hit five-year lows as worried customers cut back on spending. Meanwhile manufacturing businesses have had to deal with rising materials costs thanks to the weak pound.

Even the good news comes with caveats. Exporters are gaining orders as overseas firms cash in on the pound's decline, but SMEs aren’t always able to keep up with orders because of skills shortages. A decline in migrant workers explains part of the problem, but a majority of firms say that new hires require more support than anticipated.

Mitigation strategies

Some SMEs are addressing Brexit uncertainty by putting long-term deals in place with suppliers, and by stockpiling to help prevent material or stock shortages. With these systems in place, entrepreneurs must then take the time to consider the skills their business needs to grow. That means not only taking the time to assess hiring options, and setting plans in motion as early as possible, but hiring quickly when the right worker comes along.

In order to commit effectively to these strategies, the company balance sheet must be strong. Take the time to compare your banking providers to be sure you have a partner you can rely on. Nearly half of SMEs are left waiting for at least two weeks for lending decisions, so having loans pre-approved or having documentation in place for fast decisions could prove crucial when it comes to crunch time for your company.

Why cash flow is the cornerstone

This brings us to the crux of the matter; namely that none of these strategies are sustainable if your business cannot maintain a steady cash flow. If your business relies on, or is supported by, industry bodies and innovation funds, check what their plans are post-Brexit, as there’s a risk that funding could be disrupted or even stopped entirely.

If these changes come into force, your company will need to maximise every resource it has. That means optimising your invoicing systems, ensuring that your contracts are water-tight and empower you to pursue unpaid invoices legally, and finding the right partner to sensitively enforce debts.

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