Balance your SME’s cash flow — 4 digital hacks

Emma Sjölund

The invoice payment periods have become longer for a large proportion of companies – we present the best digital means for cash flow management, with which an SME succeeds

If your business’s cash would circulate faster, how would it affect the growth of your business? 

UK SMEs are owed more than £586billion in outstanding invoices, according to recent research from Lloyds Bank. Late payments will be an issue next year as well, as nearly a third of businesses expects more customers to require deferred payment terms in the next six months.

“UK SMEs are owed more than £586billion in outstanding invoices.”

What should an SME do? Complaining to customers about late payments can ultimately lead to the loss of those customers, which often are bigger customers and great sources of income.

Usually, the first solution to cash flow challenges has been cutting down on expenses. Getting rid of employees, minimising the marketing budget and paying operating costs late – basically slowing down growth.

A better future with cash flow management

No reason to give up just yet. There are several ways to manage and improve cash flow, enabling an SME to go beyond mere survival to success. We listed four ways in which you can improve your company's cash flow right away.

1. Use a cloud-based billing system

Cloud services allow you to take care of invoicing efficiently. You might also get paid faster because electronic invoices can speed up payments. For example, WAVE offers all basic services for free and QuickBooks, FreeAgent, KashFlow, FreshBooks and ClearBooks are affordable. These services provide all the features you need for your company's invoicing and accounting.

2. Monitor, investigate and analyse

Similar services as mentioned above will help you keep track of your business expenses on a weekly, monthly and yearly basis. For example, QuickBooks allows you to predict future cash flows. This will help you get a better overall picture of the point in which you have enough cash to grow. This, in turn, allows you to inform your staff better in terms of sales targets.

"How well do you know the people whom you do business with?”

What about the people with whom you do business – do you know who they actually are? Credit reports can be purchased from the credit reporting agencies Experian, Equifax or TransUnion. If your customer has published their accounts, it gets even easier. Websites such as Companies House and Creditsafe offer published accounts as well as Duedil, which is free for start-ups. Being on track with your customer’s credit worthiness allows you to better assess risk and avoid credit losses.

3. Let cloud services take care of your receivables

SMEs typically cannot afford to hire full time employees to take care of receivables. This means that, generally, the business owner/CEO uses their valuable time managing it, instead of focusing on more important tasks, such as growth. Yaypay is a simple way to free your time and make sure that the bills will be paid on time. Yaypay provides a range of services including reminder emails and phone calls and it integrates easily with most online billing services.

4. Take a proactive approach to cash flow management 

Even if your invoices are paid on time, it is not a solution to cash flow problems. Giving long payment terms practically means handing out free loans. Especially within the supermarkets or high street retailers, a payment term of 90 days is a commonality that is difficult to break. Thus, it literally pays off to be proactive with cash flow management. 

“Giving long payment terms practically means handing out free loans.”

Companies such as AREX offer a new range of options that allow you to finance your receivables immediately. AREX offers companies a way to change receivables into cash in a marketplace, where professional investors finance these invoices against a low fee. The SME decides entirely for themselves how they want to price the invoice. 

Long payment periods and unpaid invoices are not new phenomena, but something with which SMEs have struggled with for years.

No longer will the creation of a smart strategy for receivables management be a daunting obstacle for SMEs. If you want to deepen your knowledge on how to focus on growing your company, get our newsletter that offers monthly bundles of fintech insights and digital hacks.



Emma Sjölund

Content Marketing

The author is an advocate of clear communication and gets excited about automation, optimisation, and growth.