CASH FLOW PRESSURES 2023 Ep. 1

The subject of addressing cash flow pressures is going to be an increasingly hot topic among SME owners across the coming months.

Accordingly, I intend to shine a spotlight on some specific cash flow related issues over the months ahead. I plan to do this by sharing with you some “cash flow pressures” related reports and articles coming through the media, give you my thoughts on the issues raised and give you some suggestions on ACTION you should take if the circumstances described resonate with you and relate to your business.

Today, I want to share some eye-opening insights for SME owners from a press release by the Federation of Small Businesses (FSB) dated 19th October 2022. The anecdotal evidence that I’ve heard so far during 2023 suggests that for many SME owners cash flow pressures are now even more severe than they were back in October of last year.

📉 Confidence Levels Declining, Late Payments Add to Pressure

The FSB report for Q3 of 2022 paints a concerning picture, showing a fall in small firms’ confidence levels.

Rising costs continue to be a major hurdle and late payment woes are adding additional pressure on margins and cash flow, making it crucial to urgently and effectively address cash flow issues..

💸 Soaring Costs: Identifying the Key Factors

Utility bills and fuel prices lead the list of rising cost pressures. Additionally, inputs and labour costs have risen for many small businesses. In order to retain experienced workers many small business employers have increased wages over the last year. These mounting expenses are putting considerable strain on the CASH OUTFLOW side of the CASH FLOW EQUATION.

The demand among SME owners for additional financing has also risen, with apparently 13% of businesses applying for finance in Q3 of 2022. It’s noteworthy that nearly half (46%) of those seeking financing were doing so to manage cash flow.

In my opinion raising additional bank finance to address cash flow pressures is at best a very short term AND expensive solution e.g. think how much more expensive bank overdraft interest is now than it was eighteen months ago AND keep in mind that bank lending to small business owners generally requires a personal guarantee from the business owner…………….increasing personal guarantee exposure is not something I’d recommend in these turbulent times.

💸 TAKE ACTION On Slowing Cash Inflows

On cash flow, I recommend breaking the big problem down into smaller problems which can then be addressed individually. Please consider this simple equation :-

CASH FLOW = Cash inflows – Cash Outflows

Accordingly do all you can to maximise cash inflows whilst carefully managing cash outflows and carefully consider the elimination/reduction of each non critical cash outflows.

Cash Inflows
For many SME owners improving cash inflows will centre around collecting trade debtors efficiently, on time and taking steps to ensure that slow payers are brought back to the agreed terms of credit.

In short, think hard about your cash inflows and your cash outflows then …….

                                     TAKE ACTION !!!

If you don’t have the skills in house to significantly improve your cash flow then you need to bring in the required skills.  Whether you bring those skills in from JWM Business Advice or from another professional with the necessary skill set is not the issue. The issue is that you TAKE ACTION to improve your cash flow.

……………………………. Here is a link to the full FSB report referred to:-

https://www.fsb.org.uk/resources-page/rising-costs-and-falling-revenues-causing-worst-small-business-pessimism-outside-lockdowns-new-figures-reveal.html