The April Hangover: why summer is the most dangerous season for cash flow

Investment is an act of optimism. In April, as the new financial year kicks in, I see it across the
board: businesses hiring, stocking up and launching marketing campaigns. Every time I check
my messages, there are stories about how businesses have planted the seeds for a year of
growth.

As June comes in, though, it’s a different story. The invoices from that April expansion are
hitting your desk. The tax man is knocking. And that projected revenue is still a few weeks (or
sometimes, months) out.

Every year, like clockwork, I see the “Summer Cash Crunch” claim victims that were otherwise
perfectly healthy in the spring. As CEO at Swoop, I have a front-row seat to the financial health
of thousands of SMEs. Here’s what I see:

The “cash crunch” bites twice

Whether you are heading into your peak season or your quietest, the risk is the same, just
dressed in different clothes:

• The “Busy” Trap: In hospitality and tourism, you’re scaling up. You’re paying for extra staff, double the inventory and increased utility bills now, but your customers won’t pay the bill (or the platforms won’t release the funds) until later.
• The “Slow” Doldrums: In B2B or professional services, the world goes on holiday. Decision-makers are at the beach, signing off on payments slows to a crawl and your pipeline freezes. Your overheads, however, remain at 100%.

I am forever banging the drum for cash flow. While it can seem counter intuitive, any business
can get into cash flow problems, even when they are busy. (Your busiest times might be when
you’re most likely to let your eye off the ball.) It’s the number one reason why businesses fail
and the number one thing you need to worry about as a business owner. Everything else can be
a secondary concern.

Seeing the pattern

The most dangerous phrase in business is “We’ll be fine when [X] pays us.” Hope is not a cash
flow strategy. Working with hundreds of businesses has taught me that the difference between
the survivors and the casualties comes down to one crucial factor: timing.
Whether it’s negotiating supplier terms, looking at invoice finance to bridge the gap or securing
a working capital line before the bank balance hits zero, the time to move is while you still have
the room to breathe.
Don’t let your business suffer during the summer. Give it the capital support it needs.