How to manage your finances and mitigate cash flow problems as inflation rises

Nearly half of small to medium sized enterprises (SMEs) are experiencing cash flow problems as a result of inflation, according to data from Intuit QuickBooks’ latest quarterly Small Business Insights survey. 

To make matters worse, 51 per cent cite poor financial or resource management as the main factors holding their businesses back from achieving their full growth potential. 

With 57 per cent of SME owners predicting rising costs over the next quarter, these issues with cash flow and financial management will only increase if businesses do not take action to mitigate against future problems. 

Here’s what you can do to manage your finances and mitigate cash flow problems as inflation rises. 

Boost financial awareness across your whole team 

Financial awareness should not just be the preserve of your finance team. 

Educating your whole team to improve their financial understanding will better equip them to handle future financial issues. 

Employees and team leaders who understand what gross profit, overheads, and capital expenditure mean will be able to work smarter, budget more effectively, and make better business decisions.  

Model different scenarios 

Modelling different scenarios, for example, supply chain issues or customer downturn allows you to be flexible with your financial forecasting. 

This isn’t just about preparing for the worst. 

With flexible modelling, you can anticipate potential opportunities for your business. 

Although it is difficult to predict every possible scenario, taking the time to think through and prepare for a range of possibilities will make you better equipped to handle future curveballs.  

This flexibility will put you in a better position to respond to challenges and make the most of opportunities. 

Review your numbers regularly 

Scheduling in a regular review of your income and expenditure will help you keep on top of your finances, spot problems earlier, and identify opportunities to cut costs. 

This will also ensure you understand how your finances are being impacted by external and internal changes as they happen, enabling you to respond quickly to mitigate problems and manage your costs wisely.  

Regular, accurate bookkeeping will help to provide the clear numbers you need to check in on your business finances. 

Invest in accounting software 

Cloud accounting software can save you valuable time and money by automating routine tasks accurately and quickly. 

For example, you can use software to send invoices and reminders automatically, encouraging your customers to pay sooner and thus boosting your cash flow. 

The best cloud solutions can also provide real-time data and insights – crucial for helping you make more informed decisions.  

Although investing in cloud accounting software represents an upfront cost, you will reap the benefits of greater efficiencies and better financial management down the line. 

Finally – don’t panic! 

The increasing pressures of inflation and rising costs are enough to send your head into a spin, but it is important to stay calm. 

Panicking will lead to you making rushed decisions in the heat of the moment – decisions that are unlikely to serve your business interests in the long run. 

Taking a moment to step back and review the situation calmly will help you avoid making hasty decisions that you might regret later. 

Better financial management with Butterworth Barlow 

If you’re an SME business owner and you’re worried about rising costs, you’re not alone. 

As the Small Business Insights survey shows, many businesses are concerned about their finances. 

Working with expert accountants can help to relieve the pressure you’re under.  

At Butterworth Barlow, we’ll take care of your accounts and help you utilise software to streamline financial processes and cut costs. 

As your trusted business advisers, we’ll go beyond the numbers to provide you with essential insights into your financial performance, empowering you to make changes that will benefit your business. 

Whatever financial support you need, we’re here to help. 

Don’t let poor financial management hold you back. Contact Butterworth Barlow today for expert support and guidance.