How to Solve Common Cash Flow Problems in Your SME

Ah, cash flow – the lifeblood of any business. We all know that feeling when invoices pile up, payments are slow to arrive, and suddenly, the bank balance isn’t looking as healthy as we’d like. It’s the classic rollercoaster of SME life.

But the good news? Most cash flow problems have straightforward solutions. With the right planning and a few tweaks, you can smooth out those peaks and troughs and keep your business ticking along nicely.

Here’s how to tackle some of the biggest cash flow headaches:

1. Forecasting: Seeing the Cash Flow Gaps Before They Hit You

One of the most common issues SMEs face is simply not knowing what’s coming in and going out – until it’s too late. If you don’t have a clear cash flow forecast, you’re driving blind.

💡 How to fix it: 

• Start with a rolling 13-week cash flow forecast. This gives you visibility of what’s due in and out, week by week.
• Use a simple spreadsheet or accounting software to track expected receipts (invoices due to be paid) and upcoming expenses.
• Be realistic—don’t assume everyone will pay on time! Factor in real-world delays.
• Check it weekly and update as you go—cash flow is a living thing, not a set-and-forget spreadsheet.

Even a basic forecast will give you time to react, whether that’s chasing payments, negotiating terms, or delaying non-essential spending.

2. Getting Paid Faster: Stop Being Your Customers’ Interest-Free Loan

Late payments are one of the biggest cash flow killers. The longer customers take to pay, the harder it is for you to manage your own bills.

💡 How to speed things up:

• Invoice promptly – The clock doesn’t start until you send the bill, so don’t sit on it.
• Set clear payment terms – If you’re offering 30 days, make sure that’s actually necessary. Could you shorten this to 14 days?
• Make it easy – Offer multiple payment methods, including card payments or direct debit, to remove friction.
• Chase smartly – Automate reminders via your accounting system and follow up with a human touch if needed. A friendly call often works better than endless emails.
• Use carrots and sticks – Consider early payment discounts (if margins allow) or late payment charges (if enforceable).

If a customer is consistently late, review their terms or consider stricter upfront payments. Your business isn’t a bank!

3. Keeping Stock or services Moving: Don’t Let Your Cash Sit on the table

Holding too much stock ties up cash. But too little stock and you risk missing out on sales. The same principle is true for service based businesses, focussing on the wrong services and you’re missing out on valuable opportunities. It’s a delicate balance, but one you need to manage well.

💡 How to keep things working for you:

• Know your best sellers – Focus on what moves fast and keep those stocked at the right levels. What services are easier to sell or give the best profit margins?
• Reduce slow-moving items – If something’s gathering dust, discount it or bundle it to move it on. Service not selling? Rethink your marketing or drop it.
• Order smarter – Work closely with suppliers to place smaller, more frequent orders rather than big one-off purchases. Know your profit margins on your services – what’s your ROI? How can you cut costs?
• Consider just-in-time stock – Can you align purchases more closely with actual demand? 

The goal is to have enough stock to meet demand but not so much that cash is unnecessarily locked up.

4. Managing Creditors: Keeping Your Own Payments Under Control

Just as you want to be paid on time, you also need to be smart about how you pay others. Paying suppliers too early can leave you short, while leaving it too late can strain relationships.

💡 How to optimise outgoing payments:

• Make use of payment terms – If suppliers offer 30 days, don’t pay on day 5 unless there’s a benefit to doing so.
• Negotiate where possible – Longstanding suppliers may offer extended terms, particularly if you’re a reliable customer.
• Prioritise payments – If cash is tight, focus on essentials first (e.g., payroll, key suppliers, HMRC).
• Review contracts – Are you locked into unnecessary commitments? Can you renegotiate terms to improve cash flow?

Balancing payments in line with expected income ensures you keep things running without unnecessary pressure on cash reserves.

Final Thought: Cash Flow is About Proactive Management, Not Just Luck

Cash flow issues are common, but they don’t have to be all-comsuming. With clear forecasting, proactive debtor management, better stock control, and smart creditor handling, you can take control rather than constantly firefighting, and spend more time on the commercial and strategic projects that will drive your business success forward.

If cash flow still feels like a battle, it might be time to review your pricing, margins, or funding options – but that’s a whole other blog post!

Need help sorting out your business’s cash flow challenges? Get in touch – we’ve helped plenty of SMEs turn cash flow nightmares into smooth sailing.

AMBITIOUS BUSINESS OWNERS

Portfolio Finance Director Services

ASPRIRING PORTFOLIO FDs

Online Group Course

Privacy Policy