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Amongst the most critical factors that lead to company challenges for small and medium-sized companies is cashflow management. It’s possible to be very profitable on paper but experience financial problems if the cashflow becomes a problem. Given the problems we all now face this issue couldn’t be more important today.

Managing cashflow sounds so easy but we all know that as small and medium-sized businesses we don’t hold all the cards. The lack of urgency in payments from larger company clients, the voracity and demands of tax authorities and the continuing and growing intrusion of regulators are never-ending.

Despite these and other challenges, here are some hints on what can be done to achieve better control and management of cashflow. Hopefully, owners of small and medium-sized companies will find this helpful.

  • Identify the items in the company’s income and expenditure which can have the most significant impact on cashflow and manage these items closely. These are likely to include issuing invoices promptly and then chasing debtors for payment.
  • Plan realistically on the flow of future business. Take a pessimistic view of the future and plan accordingly. If its better than planned so much the better.
  • Look more closely at the linkage between revenue lines and their impact on costs. That’s to say not just the profit but also the timing of costs to be paid and the receipt of payments. It might be very attractive to take on a piece of business with good profits but if the gap between having to pay suppliers and receiving the income is large its sensible to reflect whether this business is good for the company.
  • Review and reflect on how good your forecasts of timing of payments is in practice. This will lead to better forecasts in future and will help with the management of cashflow.
  • Look at operating expenses again and assess whether the staffing levels and costs remain sustainable in the current circumstances. Are there assets which are no longer needed and should be eliminated. As a manufacturer perhaps slow-moving stocks should be sold off at a discount.
  • Look at your suppliers and respond quickly to those who are diligent in sending in invoices and always keen to keep you informed as compared with those who are less consistent and don’t keep you abreast of things. In fact, review suppliers with cashflow in mind.
  • Ask customers to pay more quickly in today’s circumstances and try to get them to pay a deposit and with your suppliers try to get extended payment terms.

Of course, it’s also a time when it’s appropriate to review financing needs from the various financial sources


All of these are useful in keeping control of cashflow. In fact, I have developed a tool for doing this with small and medium-sized companies called ARC, which stands for: Analyse, Review, Change.

If you’d like to learn more about this and to use in these uncertain times contact me at andrewkenneth@mac.com.