Cashflow is the lifeblood of any company, but for SMEs it really is make or break. Managed badly, it can drive a promising venture into the ground overnight; managed well, it can help you grow your business at a rapid rate.
This week, we’ll focus on how to maintain a healthy balance sheet, manage relationships with customers and suppliers, and make sure that your business has constant access to the money it needs – for the day-to-day essentials, and to fulfill the bigger vision.
As we covered in detail here, maintaining your cashflow means looking ahead to spot problems before they have a chance to damage the company, and making sure you’re always preparing for the worse. But it’s not all doom and gloom: an intricate knowledge of your cashflow means you can analyse patterns to help you understand what isn’t working in your business, how to change it and, crucially, how to seize opportunities for growth. Exciting developments in financial technology are giving rise to a wave of new tools for small business owners to visualise and quickly respond to these opportunities; we’ll cover some of these in detail later in the week.
We’ll also take a critical look at the options available for those businesses that are struggling to get their suppliers to either pay them on time, or within a reasonable time frame. Figures released last month suggest that SME cashflow bounced back to pre-crash levels in 2014, but many smaller businesses continue to battle with onerous payment terms placed on them by larger firms and institutions.
Despite EU and UK government rules designed to hold organisations to 30 or 60 day terms, in practice, small businesses often resort to measures that see them lose money on their invoices rather than wait it out – meaning that many of the proposed “solutions” actually perpetuate the problem, by rewarding large-scale customers for dragging their heels. As political parties prepare to tackle the issue, it’s essential that SMEs aren’t left with a choice between unfeasible lead times and slashing profits, just to get paid.
As always, we’d love to hear your thoughts. You can join the conversation by tweeting us at @SMEInsider with the hashtag #GrowCashflow.
And remember, when it comes to cash: turnover is vanity, profit is sanity!