Cash Management Realities for UK Mid-Market Businesses: Time for Straight Talk
Let's be clear about what's happening right now: growing UK businesses are facing a genuine cash crunch. The Bank of England data shows SMEs holding roughly 30% less in cash reserves compared to pre-pandemic levels, with £1-10M turnover businesses particularly exposed. The Financial Times didn't mince words in their April report: "Mid-sized enterprises face a cash flow triple threat: extended payment terms from larger customers, rising input costs, and tightening credit conditions." If this describes your situation, you need practical solutions, not theoretical advice.
Here's what I consistently see when reviewing client businesses: between 15-20% of your annual revenue is unnecessarily trapped in poor working capital processes. The biggest culprit? Weak credit control. You're effectively financing your customers' operations while struggling to fund your own growth. This isn't sustainable. The British Chambers of Commerce data confirms what I've observed for years - cutting just seven days from your debtor days improves available cash by around 12%. This isn't complex: implement proper credit checks before taking on new customers, set up automated payment reminders that actually work, and offer early payment discounts that make financial sense. Your business isn't a bank – stop acting like one.
Your inventory management is likely costing you dearly as well. The Economist recently highlighted that typical UK businesses hold 23-28% more stock than they actually need. I understand why - after Brexit and pandemic disruptions, you've been burned by stockouts. But the pendulum has swung too far the other way. Look at your inventory turn rates by product category. Anything turning less than four times annually needs scrutiny. Have frank conversations with suppliers about consignment stock arrangements. Every pound tied up in slow-moving inventory is a pound not working for your business growth. This isn't about complex supply chain theory – it's about applying basic financial discipline to your stock management.
Most critically, you cannot manage what you don't measure. ICAEW research shows businesses using monthly cash flow forecasting are 62% more likely to maintain adequate liquidity than those using quarterly or annual projections. Weekly forecasting is no longer a luxury – it's a basic survival tool. In my experience, the businesses that thrive implement rolling 13-week cash forecasts and actually use them to drive decisions. McKinsey's latest SME resilience report confirmed what I've seen across hundreds of client engagements: "Businesses that survived recent economic shocks weren't necessarily the most profitable, but invariably had superior cash management systems." If you don't have clear visibility of your cash position for the next three months, you're flying blind. This needs to change immediately if you're serious about growing past the £10M mark.