How to...

Achieve better cash flow

Managing cash flow for SMEs is a challenge but can become a far simpler task to manage by taking a handful of easy steps, says Karen Penney, Vice President and General Manager UK, American Express Global Corporate Payments, Europe.


Managing cash flow continues to be a key challenge for small and medium sized UK businesses. Two thirds of SMEs have experienced late payments of 90 days or more in the last six months, so it’s perhaps not surprising that managing cash flow can be a constant juggling act.

be a constant juggling act. However, efficient management of expenses and business travel expenses in particular, can significantly aid cash flow and there are a number of solutions available to tackle some of the challenges involved. Below are five steps to help with effective management of cash flow.

STEP 1: Free up lines of credit. As the economy improves and businesses look at routes for growth, it can be tempting to become over-reliant on the main line of credit for managing cash flow, rather than using that money to invest in other ventures.

Companies can ease cash flow pressures by making simple changes to operational practices. For example, a third party payment provider can pay suppliers on a company’s behalf but doesn’t require payment for up to 58 days.

This can significantly help to improve cash flow, and in addition to bringing considerable financial benefits, also strengthens relationships between the company and its suppliers.

STEP 2: Ensure greater visibility on expenses.
A lack of visibility when it comes to expenditure, with unwelcome ‘surprise’ bills or unexpected expenses, make managing cash flow a huge challenge. By doing something as simple as automating expenses – either through the use of commercial cards or within existing systems – companies can gain better visibility of incoming and outgoing sums, making cash flow much easier to manage and control.

STEP 3: Travel and entertainment policies.
Creating or updating travel and entertainment expenses policies allows businesses to specify preferred suppliers. This not only ensures consistency across all travel arrangements but also ensures that all costs are pre-agreed and closely monitored.

Approving incurred expenses during the claims process instead of pre-approving expenditure is also a useful term to include in expense policies, to generate a sense of employee accountability and to ensure there are no unwelcome surprises.

STEP 4: Effective forecasting.
By improving visibility of outgoings, businesses can gain a better overview of all expenditure, as well as a greater understanding of potential cash pressures in the future.

Expense management tools ensure that businesses can track trends, such as potential over-expenditure or excessive ordering. Having accurate management information systems and forecasting in place ultimately leads to tighter financial control resulting, hopefully, in more opportunities for investment and growth.

STEP 5: Negotiate with suppliers.
As well as giving insights to help long-term forecasting, the data from these expense management systems can be invaluable for managing cash flow issues in the short term by flagging any areas where costs are too high or inconsistent.

This then allows companies to consolidate suppliers across all business travel and puts them in a stronger position to negotiate preferential rates going forward.

By partnering with a provider that offers the tools to free up capital and effectively manage travel expenses, businesses can truly benefit from increased visibility of expenditure, using data to inform T&E policies and negotiate with key suppliers.