How to optimise cash flow in tough economic conditions

Samir El-Sabini. CEO & Co-founder at Juni


Having a solid cash flow strategy has always been important, add a recession into the mix and this strategy becomes crucial.

Current market conditions have knocked business confidence and with the gap between production and sales growing larger, some are struggling to stay ahead of the curve. Recent research found that over half of SME owners (54%) cited inflation and rising costs as a cause for sleepless nights, while they try to reconcile increased production costs with their own pricing strategies. Combined with the knowledge that consumers are being more selective with their spending – businesses may find themselves with less working capital to support operations.

This situation looks set to become harder before it gets easier, but fortunately, measures can be put in place to optimise cash flow to help navigate through these challenging times. From enhancing systems and payment methods to tracking spend in real-time, businesses can improve cash flow if they have a solid plan in place.

Samir El-Sabini


Better bookkeeping

It may sound obvious but assessing your books is the first place to start. Understanding where money comes and goes can help you see where implementing cash flow strategies will prove the most useful.

Look for software and integrations that make it easy to do your bookkeeping and collect the right data. For example, linking your bank accounts and credit cards to your accounting software will help you manage your transactions digitally. This way you can automate the syncing of any transactions between accounts and be better informed on every single penny moving in and out of your account.


Upgrading invoicing systems and payment methods

When relying on manual or overly complex invoicing systems, some bills can easily be forgotten – exposing you to nasty surprises down the line. Upgrading your invoicing system can make a big difference in helping ensure that supplier invoices are paid in a regular, timely manner.

Reassessing your payment methods is another way for ecommerce businesses to improve cash flow. Some payment gateways are quicker to reconcile than others and switching to one with low fees and fast reconciliation can make sure you’ve got the capital you need when you need it.


Identify where to cut costs

In many cases, the problem isn’t cash coming in, it’s the access to this cash that can be an issue for businesses. For example, the gap between spending on producing a product and recouping the money from sales can leave businesses needing better cash flow.

Having a complete overview of your company’s finances will highlight where you can rearrange your expenses to ensure consistent cash flow for unseen needs in the future. Whether you renegotiate with suppliers, cut unnecessary expenses such as redundant subscriptions or consider remote working to cut down on office size and overheads, you can decide where to cut and invest for optimal cash flow improvement. And the best solution will depend on your individual business goals.


Keep track of marketing spend

Marketing spend can be essential for a business’ success, but that doesn’t mean you can’t make efficiencies. Getting the right insights into your marketing spend is essential for optimisation. It’s crucial not only to measure how much you’re spending but also if it’s worth it. Focus on ROI (return on investment) and CAC (customer acquisition cost) and if your ads aren’t cutting it, consider reevaluating or pausing them.


Finding the right financing

External funding is a great way to improve cash flow, and is considered a conventional approach when cash flow is low. However, at times of high inflation and equally high interest rates, traditional debt financing from banks can be too expensive and risky for some businesses to consider. Banks are also more likely to turn down applications at this time.
Instead, alternative finance solutions, like revenue-based embedded finance can allow businesses to repay loans as a percentage of revenue rather than a fixed interest rate – making it easier not to default on loans when times are tough.


Looking ahead

Maintaining cash flow is always a balancing act for businesses but forecasting can help you plan ahead. Richard Branson once described cash flow as the lifeblood of business. During these economic times, this statement could not be more accurate.

The first step to improving cash flow is creating a precise overview of your finances, managing what comes in and out of accounts in real-time and working out where you can improve your spending. It’s especially useful when it comes to seasonality, during times when cash flow doesn’t feel consistent. From here, you can make informed decisions based on past and predicted behaviours and mitigate against market pressures.


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