Managing cash flow challenges in SMEs

Managing cash flow may not be the most exciting part of growing a business, but it’s actually the most vital. Cash flow is the lifeblood of your business, and to keep it afloat and make it thrive, you need to address the cash flow challenges that threaten your business’ survival and growth.

Common cash flow problems among SMEs

Get to the root of your cash flow challenges to better manage your working capital and avoid serious repercussions. The following are the common cash flow challenges you should take in hand: 

1. Late paying customers

You’ll have trouble meeting your day-to-day operational expenses if your customers have made it a habit to pay invoices late. Whether or not this is causing cash flow problems, you still need to ensure that strict payment terms are in place. Optimise your collections process to make sure that you have enough cash for payroll, inventory, and other business expenses and growth opportunities. You can also explore debtor financing options to generate cash using your unpaid invoices. 

2. Unstable revenue streams

Unlike larger businesses with steady and regular customer bases, SMEs may experience more fluctuations in terms of revenue streams. To address this cash flow challenge, you can diversify your products and services to expand your customer base and explore new markets.

3. High operational costs

If your operating expenses are too high, your cash reserves will drain too quickly and cash flow problems will be inevitable. On top of finding more ways to generate revenue, you also need to actively look for ways to minimise expenses. You can negotiate better terms with suppliers, consider remote work arrangements, or outsource products or services to reduce fixed expenses.

4. Inefficient Inventory Management

If you’re experiencing cash flow problems, avoid overstocking and manage inventory purchases better. Although inadequate inventory may lead to missed sales opportunities, excessive inventory could also cause problems in other areas of the business. There are a lot of inventory management strategies to efficiently monitor stock levels and forecast demand. Optimise that aspect of the business to build your cash reserve and avoid negative cash flow.

Improve cash flow with Swoop

Looking to increase working capital and address cash flow problems urgently? Swoop is here to help. We offer business funding solutions that are fast, easy, and secure! Patch up your cash flow crisis before it escalates. Access funding today!