skip to Main Content

Cash is king.  Keeping an eye on the essentials.

Cashflow for Small and Medium businesses

 Starting a business is an exciting moment in your life, you’ve made a huge decision to step away from the ‘traditional’ employment and start something amazing.  You’ve got the ideas, you may even have a prototype, you’ve got great contacts and a growing network.  So what’s the worry right?

Exciting Times

Starting a business is an exciting moment in your life, you’ve made a huge decision to step away from the ‘traditional’ employment and start something amazing.  You’ve got the ideas, you may even have a prototype, you’ve got great contacts and a growing network.  So what’s the worry right?

The best part of starting a business in the digital age, is there is a vast array of software that can help you automate the mundane and enhance the exciting.   The internet is also full of useful advice to help you avoid the common array of mistakes when it comes to starting and running a business.

There’s a plethora of software to help with websites and accounting systems while marketing can be handled via social media tools. Online payment systems like PayPal or Worldpay can give you a way to process cash from vendors to customers whilst reducing the administrative overheads

However, although your business plan may be solid, it doesn’t mean you’re an expert in finance or business accounting for that matter.  This is the most important part of keeping your head above the water and ensuring the future success of your business.

Image result for cash

Equity versus debt finance

 When it comes to cash flow, liquidity is often a challenge as your company needs to grow but can be stifled by the amount of investment it can make. Small businesses frequently go bust because of limited cash flow.  Around half of new businesses cease operations within five years.   

One way to deal with this is to approach private equity firms or venture capitalists (although never approach directly – you should follow your network for introductions). If you do this, you should be prepared to give up a stake in your business as you will need to allocate shares to them-  in addition,  they will often request a place on the board so that they can keep an eye on the operation of the company.   They may also request that you change staffing and roles within the business – so be prepared for that!   Some rather awkward conversations may need to be had…

Image result for loans

The most common form of debt finance used to be a bank loan, but now there are other options such as challenger banks, online lenders to peer-to-peer (P2P) and invoice finance.  There are also ‘ICO’s which are a very new way of securing finance for your new product or service.   Tread carefully here though as they have been tainted by recent bad press around scams (some of them have turned out to be ponzi style schemes).

Debt finance allows you to stay in control of your company. The cost to your business is the interest charged on a loan, plus additional fees in some cases. You usually have to provide a personal guarantee to repay any outstanding debt in the event of company insolvency, or you may need to secure finance against company or personal assets.

Whether you use it for investing in premises, refurbishing existing premises or updating equipment, debt finance can spread the cost over months or years, easing the financial burden on your company so it can grow.


Maintain a healthy cash flow

Another alternative is ‘Invoice Financing’.   There are a few options here – Factoring and Invoice Discounting being two.   With factoring – you are essentially handing over your sales ledger to the factoring company and they will collect the money due from your customers directly.  They will make circa 85% of the funds available to your business (therefore increasing your cashflow rapidly) and the factoring company collects the total invoice amount from the customer.  The issue here is your customers will know you are using a financing company – it could affect their impression of your company.   Bear in mind that finance companies can also be quite ‘brutal’ with debt collection.   

Invoice Discounting is more transparent and you will remain responsible for collection of payments as per normal.   The finance company will lend the value of the invoices to an agreed percentage along with a monthly fee.  


Image result for cash growing  uk

In both cases the financers will require to see your accounts, customer records and may even require you to have a personal stake in the agreement.   You will also be subject to a contract term.  However, the most basic way to improve cash flow is to make sure your whole team is geared towards ensuring accounts receivable and payable processes work property – rather than just leaving it to one person to chase payment for overdue invoices.

Make your company’s cash flow the responsibility of everyone in the business and be prepared to be tough with your customers.   If they require your services – they must pay for it!

General finance advice

As a business owner, look into your internal finances daily, so you know exactly what’s going on.  Its actually quite healthy for the business to become slightly obsessive about it!   Make sure you’re not overspending in areas that could be done in-house more cost-effectively – or consider outsourcing if it helps you manage internal workload more efficiently.

 Ensure your entire team take responsibility for managing cashflow.   They don’t need to be into the detail – but ensure they consider carefully any expenses or expenditure.  Here at Beyond we now create ‘cost centres’ for key expenditure areas and assign budgets to them so that we can track expenditure carefully – normal stuff for big business, however its essential smaller businesses as well.   All your employees should be dedicated to driving your business forward – and that means taking responsibility for the bottom line.


Thats it for now.

As always – you can contact me at



Share on facebook
Share on linkedin
Share on twitter
Share on email
Hutton Henry
Hutton Henry
I'm a creative business owner, who has interests in technology, screenwriting and what makes people tick. Somehow these disciplines converge to provide a unique perspective on Post-Merger Integration ("PMI"). In my opinion, PMI (and most transformative change) works best when you consider the people aspect first.

Take our FREE Scorecard to find out if your investment is at risk.

Discover the value of technology in your portfolio and target investments to gain more confidence and uncover potentially significant risks that could affect the value of a sale or an acquisition.

More Stories

Back To Top