Cash flow worries keep 69% of SME business owners awake at night

Download our Free Excel Cash Flow Tool to help you manage your finances


The early years are the toughest for new businesses with 80% of start-ups failing in their first year. The impact of Covid-19 has stacked the odds even further against start-ups and brought unexpected hardship to many established SMEs. With expert opinion split over what the new normal will look like, when that will be and the impact it will have on the economy, it’s little wonder that 69% of SME business owners say cash flow worries have kept them awake at night.

This is detrimental to your health and damaging for your business. Entrepreneurs thrive on adrenaline but to be successful that energy must be focused on your core business and you must be able to think clearly. Too much stress can cloud your judgement and lead to poor decision making.


But, how do you make sure you’re thinking straight and maintaining focus while managing your cash flow and shoring up your future?


With a plan. It’s essential that you understand your runway and your burn rate, and how to manage them. Put simply, your runway is the length of time you can continue to trade before becoming insolvent. If your cash flow shrinks but expenses remain the same, your runway gets shorter and vice versa. Burn rate is the amount by which expenses exceed cash flow so, for example, a company with a burn rate of £20,000 and £200,000 in cash has a runway of 10 months. As cash flow and expenses change, your runway changes too. But before you can formulate a plan, you need to understand where you are right now. Here, we look at the top five priorities for SMEs and how you can use them to know where your business is, and where you want to take it. Once you know the answers to both of those, you’re in a position to make clear decisions about how you’re going to get there.


1. Understand your cash flow

It sounds simple but it’s surprising how many entrepreneurs don’t have a firm enough grip on their income and expenses. It’s absolutely vital that you use a cash flow tool to manage finances. Without this knowledge, you’re kidding yourself that you’re in control of your business.


Try our free cashflow tool for Excel.


2. Reduce costs

Reducing costs is far easier than gaining new business and should be your first port of call when looking to increase your runway. Take a look at every item you spend and ask, ‘Is it worth the investment?’ Do you have too many subscriptions that offer little or no ROI? Are you getting the best deal on your energy costs? (Use comparison websites to see if you could save).


3. Use the support available

If you’re struggling due to Covid-19, there are government schemes to aid you. Have you checked what is available and what you are eligible for? You can delay VAT and HMRC fees and well as applying for grants, and there are lots of other grants available for SMEs too. But they don’t always just come to you – you need to get out there and find them. You could also ask your suppliers for extended payment terms. Delaying payments won’t save you money, but it will ease the pressure and increase your runway.

4. Create a process for chasing late payments

Not only does this put you in control, it also makes the way you manage late payments consistent. If you’re ‘wishy-washy’ about how you chase outstanding payments you open yourself to people abusing your inconsistency and ‘trying it on’. It’s not always easy to challenge clients so this is a job that you might want to outsource.

5. Review your marketing and sales process

Is your brand visible enough? If potential clients can’t see you, they won’t hire you. Are you using social media, and if so what sort of engagement are you getting? Is your website working for you? Are you front of mind for your target audience?


We're here to help...

At Thrive Business Solutions, we offer solutions to all of the above and more. If you’re worried about how your business will survive its first year, how you’ll cope with Covid-19, or if you just want to outsource your bookkeeping to give you time to focus on what you do best, get in touch today. Our business is to make your business thrive.


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