Colin O’Flaherty, Head of Small Business, Barclaycard Payments
The last two years have been a rollercoaster for British businesses. The pandemic has brought with it an unprecedented level of uncertainty, shattering the reliability of a typical financial year and forcing UK SMEs to prove their agility in the face of adversity by focusing on the present, and controlling what is within their remit. To their immense credit, they have.
Research from the most recent Barclaycard Payments’ SME Barometer found more than half of UK SMEs believe the changes they have made because of the pandemic have made them more resilient. There is no doubt that small and medium-sized business in the UK are remarkably tough. But with instability surrounding supply chain issues and COVID-19 restrictions set to continue well into 2022, it is vital that small businesses have confidence in their cash flow.
In terms of New Year resolutions, taking steps to improve cash flow is not only one of the most effective ways to stabilise your business, but also one of the most straightforward. Our Barometer found that half of British businesses do not know how to improve their cash flow, but there are simple steps.
To make the task feel less daunting, here are my five key strategies to improving confidence in your cash flow for 2022, starting now.
In such difficult times an open and honest conversation can go a long way. All links of the supply chain have been affected by the pandemic and a discussion with a supplier about the impact any potential issues are having on your business could bolster understanding and bring solutions to light. A strong and mutual relationship with a supplier will always be a benefit to a business and is well worth building from day dot.
Additionally, businesses can consider expanding their supplier network to limit the impact on their operations. In such cases, it is important to consider payment options when working with new suppliers, for example, by paying with a business cards, companies are able to reduce the financial risks, should an order not arrive, or be damaged.
Sustainability will be key for all SMEs in 2022, but making positive changes need not be burdensome. One way to improve your environmental credentials while also consolidating cash flow is to cut down on wastage, whether that’s using ingenuity to find a home for surplus stock or innovating to create new offerings which work for consumers, such as a subscriptions option that safeguards income and aids better prediction for your purchases based on almost certain demand.
There is no doubt that minimum-input, maximum-return tactics can be a lifesaver for busy SMEs. Using a cash-back business credit card will help you earn money for doing the same thing you were doing anyway. It goes without saying that you should be careful when using credit facilities, but keeping on top
such products, even if just for the short term during these tricky times, is a simple but effective strategy for improving cash flow.
As financial institutions continue to work on innovative solutions to support the changing requirements of the businesses, speaking to your banking provider will allow them to offer tailored solutions to support you with cash flow needs.
Waiting on large payments or being unsure when funds might arrive is not good for cash flow or your wellbeing; by leveraging the stability of deposits, you can shore up a large chunk of finance, release funds for other purposes and keep your business development projects on track. Deposits work particularly well if customers in your industry do not pay upfront.
Keeping on top of your finances as a small business is central to a smooth-running enterprise. When everything is running as it should be, it is much easier to issue invoices quickly and pay suppliers and creditors on time. But this does not need to be a time consuming process. With automated cloud-based solutions, businesses can reduce the time it takes to invoice and keep on top of payments, whilst reducing their dependency on being ‘on premise’.
It is also vital that your customers understand your credit terms, as allowing invoices to remain unpaid for several months can start to undo a lot of the progress you’ve made in protecting your cash flow.
By following these simple steps, you will be able to master the parts of your business over which you have control and limit the impact of external pressures. There is no doubt that 2022 is going to be another unpredictable year, but I’m sure, with these tips, UK SMEs will once again show their resilience and prosper in difficult circumstances.