Cashflow Clarity in a Cost-of-Living Crisis: What SMEs Must Do Now

Introduction

Cashflow isn’t just an important element of keeping a business afloat - it’s pretty much everything. With rising interest rates, high inflation, and delayed customer payments, even profitable businesses are going under. Cashflow mismanagement is one of the top causes of UK business failures, and it’s preventable.

The Economic Reality

• UK corporate insolvencies rose by 18% in 2024, reaching levels 43% higher than pre-pandemic norms (Allianz Trade, 2024).

• Over 650,000 SMEs reported financial distress last year (Begbies Traynor, 2024).

The common denominator? Poor working capital control.

What Businesses Must Do

1. Build Cashflow Forecasts That Work

Monthly (or even weekly) rolling cash forecasts help predict shortfalls and required adjustments early. Factor in seasonality, FX volatility, and fixed costs.

2. Optimise Receivables and Payables

• Encourage early payments with small incentives.

• Eliminate cash time lag by issuing your sales invoices on time.

• Use invoice automation and credit control triggers.

• Extend supplier payment terms strategically where possible.

  
  

3. Scenario Plan and Stress-Test Liquidity

Model best-case, base-case, and worst-case scenarios. Know your break-even runway and make decisions with clarity based on likely probable outcomes.

Real-World Impact

For a fast-scaling e-commerce brand, Netstar introduced structured weekly cashflow reporting, aligned with order fulfilment cycles and marketing spend. The result? A 25% improvement in cash headroom and tighter alignment between finance and ops.

Final Insight

Cash is king and always will be. A healthy cashflow is about planning, and not luck. The earlier you forecast, communicate, and act, the more resilient your business becomes. Having a cashflow forecast gives extra confidence knowing that a business will be able to meet all its commitments and obligations as they arise while maintaining liquidity.

Do you need some help building your cash strategy? Speak to Netstar, and we’ll get you back on track.