A guide to keeping your business financially healthy
PART 1: WHY CASH FLOW MATTERS
Cash flow is the movement of money in and out of your business. Unlike profit, which is what remains after expenses, cash flow determines whether you can pay suppliers, employees, and bills on time. Many SMEs fail not because they aren’t profitable but because they run out of cash.
If you don’t have cash flow under control, your business can:
- Struggle to pay expenses on time.
- Miss growth opportunities due to lack of liquidity.
- Fail to recover from unexpected financial challenges.
Understanding and managing cash flow effectively is critical for business success.
PART 2: COMMON CASH FLOW CHALLENGES FOR SMEs
1. Late Payments from Clients
- Many SMEs operate on tight margins, and waiting for customers to pay can be disastrous.
- Unpaid invoices lead to cash shortages, making it difficult to cover costs.
How Fundoh Helps: We offer Invoice Financing, which lets you unlock cash tied up in unpaid invoices. This ensures you have working capital while waiting for payments.
2. Poor Expense Management
- Many SMEs don’t track spending properly, leading to unnecessary costs.
- A lack of budget control means cash leaks out of the business unnoticed.
Solution:
- Keep a strict budget and track all expenses.
- Use accounting software to monitor financial performance in real time.
3. Seasonal Revenue Fluctuations
- Businesses in industries like tourism, retail, and agriculture experience seasonal highs and lows.
- Without a plan, cash shortages during slow months can cripple operations.
Solution:
- Use a Revolving Capital Facility to access funds when cash flow slows.
- Build cash reserves during peak months to sustain the business in off-seasons.
4. Growing Too Fast Without Cash Reserves
- Expanding too quickly without enough cash on hand can put SMEs at risk.
- Scaling requires upfront investment before revenue catches up.
Solution:
- Secure Trade Capital or Working Capital Finance to support business growth.
- Plan for expansion by forecasting future cash needs.
PART 3: PRACTICAL STRATEGIES TO IMPROVE CASH FLOW
1. Improve Payment Collection
- Invoice clients immediately and set clear payment terms.
- Follow up on overdue payments and consider offering small discounts for early payments.
2. Cut Unnecessary Expenses
- Review expenses regularly to identify areas where you can save.
- Negotiate better deals with suppliers and consider bulk purchasing.
3. Diversify Revenue Streams
- Relying on one income source is risky.
- Consider adding new products, services, or alternative sales channels.
4. Use Smart Financing Options
- Instead of depleting cash reserves, use Short-Term Finance or Asset Finance to fund purchases.
- Leverage Purchase Order Finance to fulfill big orders without cash constraints.
PART 4: HOW TO FORECAST CASH FLOW EFFECTIVELY
1. Understand Your Income & Expenses
- Keep detailed records of money coming in and going out.
- Identify patterns in revenue and expenditure to plan ahead.
2. Create a Cash Flow Projection
- Estimate expected income and expenses for the next 3-6 months.
- Factor in slow months and unexpected costs.
3. Always Have a Safety Net
- Keep a reserve fund to cover at least 3 months of operating expenses.
- Use financing options like Line of Credit for emergencies.
PART 5: HOW FUNDOH SUPPORTS SMEs IN CASH FLOW MANAGEMENT
At Fundoh, we understand that cash flow challenges are a major pain point for SMEs. That’s why we provide tailored funding solutions, including:
- Invoice Financing – Get paid upfront for outstanding invoices.
- Trade Finance – Ensure you have enough working capital for trade deals.
- Revolving Credit – Access funds when you need them without reapplying.
- Short-Term Finance – Bridge cash flow gaps with quick access to capital.
By proactively managing your cash flow, your SME can operate smoothly, grow sustainably, and remain resilient in tough times.
Need help keeping your cash flow in check? Fundoh is here to assist. Let’s get your business funded!
