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Stabilising Cashflow in the Face of Uncertainty

Cashflow is the lifeblood of any business. Survival isn’t possible without it, and healthy cashflow supports growth, innovation and expansion. In times of uncertainty, cashflow is particularly important; providing a buffer to keep a business above water in turbulent times. Having sufficient access also enables a business to take advantage of expansion opportunities which might be out of reach for competitors with weaker cashflow.

Posted: 2nd March 2020 by Katina Hristova
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A recent American Express’s CFO survey found that 89% of UK CFOs believe that the prospect of unanticipated surprise events is a rapidly growing concern for their company[1].

In light of this, it’s no surprise that the research also revealed that 96% of CFOs think that improving cash and working capital management is more important this year than last year.

It’s not only the big players for whom access to cashflow is vital. For SMEs, it’s arguably even more significant. Having working capital to hand allows SMEs to take advantage of their size and be nimble in responding to growth opportunities.

It also creates a safety net that could make the difference between staying afloat and going under. This is particularly the case for young SMEs starting out, with recent research suggesting just 41.5% of SMEs survive the five-year mark[2].

Of course, despite the best intentions, there will always be hiccups along the way, and occasions when a business must crack down on late payments.

American Express’s SME research with Oxford Economics shows that many SMEs find it challenging to stay on top of cashflow, with 30% of UK SME leaders reporting that getting the funds to drive growth is difficult.

Taking back control of cashflow

So how can businesses keep on top of their cashflow and thrive in the face of political and economic uncertainty?

For any business, the first rule in taking control of cashflow is to keep an accurate record of all payments and outgoings. Without an up-to-date cashflow forecast for the months ahead, it’s impossible to identify vulnerabilities or determine how much can safely be invested in growth opportunities.

The next step is establishing strong relationships with suppliers and customers. For many finance departments, it can be tempting to artificially improve cashflow figures by insisting on longer payment terms with suppliers and shorter payment terms with buyers. But doing so is likely to breed ill-will and resentment in the long term.

Instead, make sure background checks are carried out to ensure you’re working with a trusted and sustainable partner, including credit checks. And then clearly communicate expectations from the outset, to establish a good working relationship based on transparency. It also helps to send invoices out immediately to facilitate prompt payment.

Of course, despite the best intentions, there will always be hiccups along the way, and occasions when a business must crack down on late payments. The most effective way of managing this is to incentivise the other party to pay on time, such as offering a small discount or favourable repeat terms. It’s also important to have an agreed and consistent escalation process in place, in cases where late payments need to be followed up.

 Supply chain financing

Once these measures have been taken, there are also products and services available to businesses to help improve their cashflow. One example is supply chain financing, which enables customers to pay suppliers via a third party. Once an agreement has been reached between the two parties and an invoice approved, the third party pays the supplier their money and the customer holds onto their capital until it receives a single consolidated invoice at the end of its billing cycle.

This process allows suppliers to receive their payment immediately and affords customers more time before the money leaves their account – improving cashflow for both parties. At American Express we offer this service to thousands of our business customers, providing them with critical support to optimise their cashflow.

Companies exercising good cashflow management are better equipped to mitigate against external uncertainty and unlock opportunities for innovation and growth – benefiting the business, its customers and its suppliers in the short, medium and long term.


[1] American Express collaborated with Institutional Investor’s Custom Research Lab on its Global and Spending Outlook, a survey of 870 senior finance executives at large enterprises, 100 of whom are based in the UK. Survey responses were gathered in November and December 2018.


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