Five cash flow management tips for SMEs, as iwoca research reveals 28% have two months or less of cash in the bank

• New research from SME lender iwoca finds over a quarter (28%) of UK SMEs have two months or less of cash in reserve
• The survey reveals the average UK SME is owed £22,000 in payments
• iwoca’s COO Seema Desai shares five practical tips to help businesses strengthen cash flow resilience
• The research accompanies the launch of iwoca's Cash Flow Resilience Benchmark, a free tool that lets SMEs compare their position against peers

New research from SME lender iwoca reveals the scale of the cash flow pressures facing UK small businesses, with many operating on limited reserves, uneven income and slow access to funding. This coincides with iwoca’s launch of a free new benchmarking tool that lets business owners compare their cash flow position against similar firms.

The report, based on a survey of 1,005 SME owners across Britain, found that:

• 28% of businesses have two months or less of cash in reserve;
• 60% experience more money going out than coming in for at least half of the year; 
• 38% would need more than 30 days to secure additional funding.

While the findings suggest that cash flow pressure remains a challenge for many businesses, iwoca COO Seema Desai says resilience can be strengthened through planning, awareness and access to finance at the right time.

1. Forecasting is your friend

Seema Desai, COO at SME lender iwoca, says: “we hear first hand from SMEs that short runways, late payments and unpredictable revenue flows are their everyday reality, but building resilience isn’t about avoiding those pressures – it’s about preparing for them.” iwoca’s research finds that one in five SMEs forecast their cash flow annually or never, and only 26% of respondents told us they forecast monthly. “Forecasting regularly can help you spot pressure points early and feel much more confident in your financial decisions.” Desai explains. “Our research found that one in every five SME owners forecasts annually or never which usually isn’t enough — without regular budgeting, you’re flying blind.”

2. Don’t let late payments slide

iwoca’s report found that 90% of businesses are affected by late payments, with the average SME being owed more than £22,000. In comparison, 60% of businesses have more outgoings than revenue for at least six months of the year. “Tightening payment terms and following up consistently makes a real difference,” says Desai. “That cash that is locked up in unpaid invoices could be supporting your growth, and working for your business.

3. Use cash as a cushion

iwoca’s research reveals that nearly three in ten (29%) SME owners lack confidence in handling a major disruption. “Although it might seem hard, maintaining a cash reserve – ideally covering several months of essential costs – is the simplest way to support your business’s cash flow. That reserve creates vital breathing space if revenues fall or unexpected costs arise.”

4. Understand your finance options before you need to use them

The survey also found that nearly four in ten SMEs (38%) would need over 30 days to secure funding, with 11% unsure how to access it at all. According to Desai, researching credit options and building lender relationships while the business is stable will help avoid the stress of trying to secure funding at the last minute. “Businesses are in a much stronger position when they know where to go before they need it,” she says. “Line up your options while things are stable, so you’re able to make faster and more informed decisions when you need to access finance.”

5. Don’t just chase profit – pursue resilience too

Even profitable businesses can face cash flow issues. iwoca’s research shows that only a small proportion of SMEs remain cash flow positive throughout the year. “Focusing entirely on the bottom line could mask how resilient a business really is,” says Desai. “What matters is whether your cash flow can absorb the ups and downs that come with running a business.” Understanding cash flow patterns, financial flexibility and exposure to disruption can give a more realistic picture of a business’s health — and help owners make better long-term decisions.