Cushion cash – a luxury few small businesses can afford

With the discrepancies in large and small business payment terms, and the lack of visibility into cash flow that many small businesses have, there is a growing number of businesses hoarding vital funds in case of emergencies.

For UK businesses, the road ahead is a bumpy one. A General Election is fast approaching and we’re in the storm’s eye of Brexit. Very few businesses, large or small, can confidently forecast their future or manage their cash-flow.

For small businesses, this uncertainty is especially concerning as they also have to battle against discrepancies in large and small business payment terms that continue to persist despite Government initiatives such as the recent duty to report on payment practices legislation. All of which has resulted in a growing number of businesses hoarding vital funds in case of emergencies.

It’s perfectly sensible to have a rainy day fund, but not if the fund itself is causing the rain. For many SMEs, cushion savings are holding back vital resources that they need to evolve and grow as a business. The reflex reaction to uncertainty is to create a buffer of cash.

But this isn’t always the right approach. With this in mind, the below outlines the ways in which small businesses can open up insight into their cash flow and free up these funds, so they can have their cake and eat it too.

Automation, automation, automation

The first thing SMEs need to do is invest in automation. Despite the fact that society continues to make advancements in technology, many businesses today still handle their finance processes with a combination of paper invoices, forms and spreadsheets. For only the smallest of businesses is this suitable.

Manual processes are slow and cumbersome. To have true visibility (and therefore control) of spend, companies need to have a close to real-time view of their cash flow. But that’s a pipe dream if you only get a view of spend, from key sources such as invoices, weeks or months after it’s occurred.
Small businesses should automate their core spending functions – especially invoices – to ensure they have an accurate and timely view of cash flow.

An automated, web or mobile based system can manage all invoices both sent and received, from purchase orders, e-invoices, paper invoices and supplier networks seamlessly.

Not only does it reduce errors and the time input needed from employees, but it also greatly improves visibility whilst also collecting valuable data. All of which means SMEs can make smarter decisions about when they need to save heavily, and when they can afford to invest in their future – rather than saving in fear all year round.

Stamp out mistakes…

When saving for a rainy day, the last thing you need is wasted cash. But with manual processes and spreadsheets, money will undoubtedly leak from your accounts due to admin issues such as duplicated invoices.

Rather than hoarding more cash, SMEs should look inside their businesses to plug the leaks and claw back vital capital, with technology helping them achieve this. OCR technology and auditing centres can now make a crucial difference by quickly processing large amounts of invoices with minimal mistakes.

A third of UK finance leaders admit to having paid a duplicate invoice. An automated system such as this can check every single receipt and flag a duplicate, saving you time and money. Rather than saving harder, firms should save smarter.

… And fraud

But it’s not just mistakes that lead to a loss of cash. Small businesses that adopt manual finance processes are a natural target for fraud, both from within and out. Fraudulent invoices are an especially big issue for SMEs that still use out-dated processes. Invoice phishing in particular, whereby scammers send numerous fake invoices, can be extremely costly.

If a business or organisation doesn’t have the correct system in place, or is trying to handle every invoice by hand, then these fraudulent invoices often slip through the cracks and in the long-term it can become a significant (and wholly avoidable) burden on the company.

Automation can help stamp this fraud out. For example, automated invoice services can flag invoices that don’t match purchases or sales, providing an effective and consistent filter to fraudulent claims that takes a fraction of the time it would take an employee. These early warning systems create transparent processes – meaning you can keep a closer eye on your money and keep hold of money that can be used for investment and growth.

Make smarter decisions

Data can be a small business’s best friend when it comes to cash-flow, but it’s impossible to utilise it if you are working off of spreadsheets and paper documents. It would simply take too long for a human to gather and analyse the information. But automated systems can provide insights into spend and cash flow that can be used to anticipate future spend, identify patterns and single out deviances allowing for greater strategic planning. At a time when planning for the future is difficult at best, SMEs should look for anything they can use to shine a light on uncertainty.

For less than you think

Of course at this point, many small businesses that are saving every penny will state that technology can be expensive, but in reality it isn’t. Such technology is extremely cost effective as you do not have on premise servers as it can be cloud based and as such is is extremely scalable.

Once core functions such as invoices have been brought under check and your data is continuing to provide further insights in to your cash-flow and how you can save on spending – automation becomes less of a cost and more of an investment.

Ultimately, SMEs can’t afford to be caught like rabbits in the headlights as the year ahead unfolds. Rather than standing still and banishing their cash to under the mattress, SMEs need to keep moving forwards, keep investing in their futures and keep growing.

In the face of uncertainty, it can seem a daunting idea. But empowered by the right technology, SMEs can have the visibility and control they need to not only weather the storm, but come out the other side even stronger.

Dafydd Llewellyn is managing director of SMB at Concur.

Further reading on cushion cash

Nominations are now open for the British Small Business Awards, the leading event celebrating the brightest stars in the SME sector. Click here to enter, and make sure you get involved today using the hashtag #BSBAwards. Good luck!

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

Related Topics

Managing Cashflow

Leave a comment