Increasing costs for UK small businesses: how to control your cashflow

Rising costs are making it increasingly difficult to create meaningful margins and keep your small business in a positive cashflow position.

The latest quarterly Small Business Insights survey from Intuit QuickBooks shows more than half of UK small businesses (57%) predict rising costs over the next 3 months.

Among them, almost two-thirds (64%) fear the impact this will have on their business—including 1 in 10 (10%) who said further cost increases would be “impossible to manage.”

These are sobering statistics, but there are ways to reduce the impact of increased costs.

4 ways to overcome rising costs and inflation

When costs are high and margins are tight, that has an undeniable impact on your bottom line. But with today’s access to deep financial forecasting and metrics, there are ways to keep your spending under control while managing cashflow in a responsible way.

Let’s take a look at four strategies for keeping costs in check:

1. Review your operational efficiency and spending:

Conduct a thorough review of all your operating expenses, from utilities and subscriptions to supplier contracts. Think about negotiating better deals, switching to more energy-efficient practices, and using technology to automate certain basic tasks. This reduces the manual workload, cuts labour costs and boosts the overall efficiency of the business.

2. Get proactive with your cashflow management:

Using the latest cashflow forecasting tools, like Float and Fathom, helps you get more forensic with your cashflow management. Look at your cash runway and spot the potential cash gaps at certain key points in the month. Make sure you’re chasing any outstanding invoices, negotiating longer payment terms with suppliers, and exploring strategies like invoice finance to unlock dead cash that’s currently tied up in receivables.

3. Diversify your revenue streams and customer base:

Relying on a single product, service, or customer segment places a lot of risk on that one revenue stream. Try exploring new market opportunities, expand your product lines, or even fully pivoting your business models, if necessary. With more diversity in your customer base and revenue streams, you’re more protected from market downturns or shifts in consumer demand.

4. Explore alternative funding and government support:

Traditional bank loans and overdrafts used to be the answer to cashflow woes. But banks are getting more risk-averse and there’s an increasing funding gap for UK SMEs. To overcome this, think about alternative finance options like asset finance, peer-to-peer lending, or government-backed schemes like the Growth Guarantee Scheme. Accessing additional capital helps to balance out your cash inflows and outflows and reduce the impact of high costs.

Talk to us about getting your spending under control

Inflation and the spiralling costs of essential raw materials, goods and services is an external factor that it’s impossible for any one business to control. But with the help of our team, you can optimise your own spending, budgeting and cashflow management to reduce the impact.