Cashflow winning out over growth after Budget blow

A survey out at the start of December highlighted growing economic uncertainty amongst SMEs in the UK following the Autumn Budget.

It is a nervousness and caution, the survey found, that could put a halt to many growth ambitions and M&A in the months ahead. The focus of SMEs instead is likely to be on cashflow and financial robustness.

The research from small business lender iwoca, in its quarterly SME Expert Index, found that businesses up and down the country were feeling more pessimistic and fearful about an upcoming recession.

Here are the main findings:
- Economic pessimism among SMEs has more than doubled, with 34 per cent of brokers reporting negative sentiment – up from 15 per cent in the second quarter of this year.

- Nearly half (47 per cent) of brokers now cite SME concerns about a potential recession, up 12 points from last quarter.

- Managing cash flow has overtaken growth as the primary driver of SME loan applications, cited by 61 per cent of brokers. Only 36 per cent of brokers said their clients were seeking loans to drive growth, the lowest proportion recorded since the third quarter of 2023. This shift underscores the immediate need for financial stability as economic challenges intensify.

- Demand for larger loans is expected to increase, with 45 per cent of brokers forecasting a rise in applications over £100,000 in the next year. That is up from 28 per cent in the last quarter and is being driven by SMEs having to grapple with rising costs and economic uncertainty.

- High-value loans are becoming increasingly important, with 15 per cent of brokers expecting growth in loan applications above £200,000.

Colin Goldstein, chief commercial officer, UK at iwoca said rising pessimism and fears of a recession are reshaping SME mindsets.
“They have a greater focus on survival over growth,” he said. “We’ve seen a surge in demand for larger loans from businesses looking for extra financial stability in uncertain times.”

Figures like these will be a blow to the new Government’s growth agenda. Its Budget was supposed to start the process of refiring the UK economy, but it has instead been blasted for its hikes in taxes and the minimum wage.

This comes on top of the already higher costs businesses have been facing in recent years as a result of higher inflation, interest rates, and supply chain disruptions caused by Brexit, the Covid pandemic and the Ukraine war.

If SMEs are battening down the hatches and securing their finances before looking once more at growth and potential M&A – then here are some pointers on how to best manage cashflow.

Cash, as the saying goes is king. Without it there is no business. It is as simple as that. There is no money to invest, to buy equipment or to pay wages.

- The first thing you need to have is a cashflow forecast. You must have clear oversight of what money is coming into the business and when and what is going out. You could use accounting software to help you.

- Late payments tend to be the main culprit when it comes to cashflow squeezes. They can also affect productivity if you spend time on the email or phone chasing up late payment after late payment. You need to have solid processes in place to chase payments and recover debts. This includes closely following the invoice process of your clients and suppliers. Do they insist on PO numbers, clearly numbered invoices, sent by PDFs rather than Microsoft Word for example? If you correctly follow their procedures and avoid any silly errors like spelling mistakes this can help speed up the payment process.

- You could even offer a discount for upfront payments or negotiate better payment terms.

- Consider leasing equipment or transport rather than buying.

- Do a stock check. Too much stock in your warehouse can tie up cash. Get lean and get it moving.

- Overdraft and loans. These are an option but be careful of rates especially with overdrafts which can be as high as 30 per cent. Again, clear forecasting can help you avoid getting into more financial trouble.


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APP_KEY
"base64:6coDXzCRsacXGmkPvjvAXO03DG2dJJdkX6rr1+rpvVg="
APP_DEBUG
"true"
APP_LOG_LEVEL
"debug"
APP_URL
"http://localhost"
DB_CONNECTION
"mysql"
DB_HOST
"127.0.0.1"
DB_PORT
"3306"
DB_DATABASE
"bizsale_db"
DB_USERNAME
"bizsale_admin"
DB_PASSWORD
"+fUTe#g#3."
BROADCAST_DRIVER
"log"
CACHE_DRIVER
"file"
SESSION_DRIVER
"file"
SESSION_LIFETIME
"120"
QUEUE_DRIVER
"sync"
REDIS_HOST
"127.0.0.1"
REDIS_PASSWORD
"null"
REDIS_PORT
"6379"
MAIL_DRIVER
"smtp"
MAIL_HOST
"smtp.mailtrap.io"
MAIL_PORT
"2525"
MAIL_USERNAME
"null"
MAIL_PASSWORD
"null"
MAIL_ENCRYPTION
"null"
PUSHER_APP_ID
""
PUSHER_APP_KEY
""
PUSHER_APP_SECRET
""
EMAIL_TESTING
"true"
COMPANIESHOUSE_KEY
"u82ND42fnkdYxqCH945hvlmaflxDPIyT2sMcWLrj"
Key Value
APP_NAME
"Laravel"
APP_ENV
"local"
APP_KEY
"base64:6coDXzCRsacXGmkPvjvAXO03DG2dJJdkX6rr1+rpvVg="
APP_DEBUG
"true"
APP_LOG_LEVEL
"debug"
APP_URL
"http://localhost"
DB_CONNECTION
"mysql"
DB_HOST
"127.0.0.1"
DB_PORT
"3306"
DB_DATABASE
"bizsale_db"
DB_USERNAME
"bizsale_admin"
DB_PASSWORD
"+fUTe#g#3."
BROADCAST_DRIVER
"log"
CACHE_DRIVER
"file"
SESSION_DRIVER
"file"
SESSION_LIFETIME
"120"
QUEUE_DRIVER
"sync"
REDIS_HOST
"127.0.0.1"
REDIS_PASSWORD
"null"
REDIS_PORT
"6379"
MAIL_DRIVER
"smtp"
MAIL_HOST
"smtp.mailtrap.io"
MAIL_PORT
"2525"
MAIL_USERNAME
"null"
MAIL_PASSWORD
"null"
MAIL_ENCRYPTION
"null"
PUSHER_APP_ID
""
PUSHER_APP_KEY
""
PUSHER_APP_SECRET
""
EMAIL_TESTING
"true"
COMPANIESHOUSE_KEY
"u82ND42fnkdYxqCH945hvlmaflxDPIyT2sMcWLrj"
0. Whoops\Handler\PrettyPageHandler