Preventing the Cash Flow Crunch in SME Operations

Cash Flow Crunch - Complete Controller

Small and Medium Enterprises (SME) have grown much in the last ten years due to growing development opportunities, embracing the latest trends, and novel machinery. At the same time, an SME has to face many challenges due to credit instruments access or monetary support.

Cash flow management is an ongoing and persistent fight that business owners have to fight to avoid failure. Check out America's Best Bookkeepers

In their study in Jan 2014, Statistic Brain revealed that the major causes of small and medium businesses’ failure are cash related. These cash flow crunches are caused due to lack of pricing knowledge, no planning, lack of financing knowledge, lack of bookkeeping experience, bad credit granting practices, insufficient borrowing practices, and insufficient inventory.

Acquire a Hold on Cash Flow

All of these pitfalls relate specifically to cash flow. Cash flow isn’t a difficult business topic. However, many small-business owners don’t want to deal with it because they think it’s “all about numbers.” But it isn’t. It’s about the health of your business.

You need to follow two primary ways to improve the cash flow in your business.

  • Income: Increase the amount of cash coming in.
  • Expenses: Decrease the amount of cash going out.

It sounds like such an easy concept. Here are some easy and amazing practices for maintaining a smooth cash flow:

  1. Calculation of business risk analysis and planning

Always keep an eye out for unexpected serious challenges and various risk factors involved with running a successful business. All kinds of “what if” scenarios should be considered for risk analysis. These, in turn, become a part of your bookkeeping process of budgeting and maintaining a healthy cash-flow.

Use a spreadsheet or bookkeeping software to enter cash inflows. Reflect a hypothetical situation by adding or deleting inflows. Check out America's Best Bookkeepers

  1. Make a new business bank account

The first and foremost step required for a start-up business is to have a separate bank account. Mixing your account will confuse and make the bookkeeping of the business budget troublesome.

  1. Efficient monitoring of inventory

Manage inventory efficiently. Maintain a sufficient inventory of fast-moving items. Do not overstock. Avoid keeping stock of dead or slow-moving items. Analyze the items which are selling and which are not. Keep the inventory levels lean so that your working capital isn’t tied-up unproductively and unprofitable.

  1. Always maintain Buffer Money

Always keep at least three months’ money saved in the bank for a rainy day so that you always have funds on hand to finance your business. Check out America's Best Bookkeepers

  1. Control Cash Flow best by bookkeeping

Many business owners postpone invoicing customers and make payments at the end of the month. Keep track of your transactions on paying the supplier and money owed by the customer by bookkeeping. Either implement accounting software or use a simple spreadsheet.

  1. Cut expenses, manage Cash outflows

Control and lessen your expenses even if you are gaining profits. Keep records by bookkeeping. Control cash flow and prevent it from overflowing. The outflow of cash will destroy your business.

  1. Grow cash

Maintain your currency balances in accounts that earn interest. Keep cash in accounts that pay interest at a higher rate. Stay away from long-term deposit certificates because, by doing this, you will be bound for a certain period. Invest in certificates that are penalty-free or funds which you will not need soon.

  1. Focusing on cash flow, not on profit

Agnes Cserahti has estimated that 90% of SMEs never plan their cash flow though they have many years’ profit forecasts. This is one of the major reasons for failure in the early stage of business. New businesses should work with clients who are reliable and who pay quickly.


Small business owners that work on good cash management always have a profitable business as they have a lower debt and loan rate. This also leads business owners to be flexible and avail new opportunities with sound peace of mind.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers