SME cash flow survival tips for the New Year

Anita Brook
Reid & Co.
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In all SMEs we know how problematic January can be for managing cash flow, from the increase in custom over the festive period to hitting a low lull in enquiries.

So should businesses use this time to develop their processes and activities for the rest of 2017, or would you be better hitting the ground and building your sales funnel?

As an experienced accountant and Director of one of Milton Keynes’ renowned accountancy practices, Reid & Co, here are my thoughts on what businesses should be focusing their efforts on in January.

What is the most important task to do in January?

Every business knows that ‘cash is king’ it’s an old adage that rings true and no business can survive without it.

We see many businesses with lots of ‘pending orders’ on the books, but until you are delivering the services, or have created an invoice; it’s not income on the balance sheet.

One of the first pieces of advice we provide to businesses is to set clear cash flow targets. This is particularly important in the New Year and is a great way of controlling cash flow and income within a business, as well as forecasting for the next quarter or even year ahead.

How can businesses put in place cash flow protection for the rest of the year?

In addition to the cash flow target, I always stress how important it is for businesses to have clear payment terms with their clients and invoice promptly.

If you wait two weeks or a month after the work has been complete, then this has a huge impact on the business as you may not get paid for 60 or even 90 days.

What changes will impact SMEs in 2017?

The Autumn Statement announced some really positive changes for SMEs coming into 2017, such as funding routes specifically driven to drive growth and opportunity.

Take the Regional support program for example, which has awarded £1.8bn to Local Enterprise Partnerships in England.

The funding is aimed at improving transport connections, unlocking house building, boosting skills, and enhancing digital connectivity. This will help particularly small businesses with growth and innovation.

There are also other funding opportunities from Government such as the £400m in venture capital funds through the British Business Bank for growing innovative firms.

My 'top tip’ for going into the New Year

Technology or effective systems in finance can make it much easier to manage cash flow, even something as simple as an Excel spreadsheet can help you and the business stay on track with the basic information such as expenditure and income.

Also, ensure you measure things such as interest rates (with your bank or suppliers) and exchange rates if you trade internationally. These may seem like obvious steps but you’d be surprised how many times we see this detrimentally impact a firm.

January doesn't have to be a time for cutting back and hunkering down, if you are appropriately prepared for the New Year it could be a time of prosperity while others around you are floundering. By taking small steps in the run up to January you are giving yourself a much better chance to not only survive but to use it as an opportunity to push forward and enter the new year with a spring in your step.


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