New research from Novuna Business Cash Flow shows a disconnect between SME leaders’ understanding of cash flow and the pressures they experience when managing it.
A survey of 1,000 SME decision makers found that a third were unable to accurately define cash flow, despite the majority reporting challenges within their business.
The findings come against the backdrop of the Autumn Budget’s cautious economic outlook, adding to the strain facing small and medium-sized firms.
The study revealed that 82% of SMEs have encountered cash flow difficulties, driven primarily by late customer payments at 36% and seasonal fluctuations at 35%.
Some 27% cited unexpected changes in trading conditions as a further source of disruption. Smaller firms were particularly affected, with 91% of small businesses, 90% of medium-sized businesses and 84% of micro companies reporting problems.
Among sole traders, 68% had experienced disruption. SMEs said they faced cash flow issues an average of 7.4 times a year, yet more than half continue to rely on short-term measures such as cost-cutting, taking out loans or borrowing from friends and family.
Only a minority turn to longer-term solutions including invoice finance at 11% or outsourced credit control at 5%.
John Atkinson, head of commercial and strategy at Novuna Business Cash Flow, said: “These figures show that cash flow problems are not occasional – they’re part of the everyday reality for most SMEs.
“When challenges come up repeatedly across the year, it not only puts pressure on finances but also limits a business’s ability to plan ahead and grow with confidence.”
The report also found that cash flow pressures affect the mindset of business leaders. Some 33% of respondents said they feel confident managing issues when they arise, while 28% said these pressures motivate them to strengthen financial planning.
However, almost a quarter admitted to feelings of stress or anxiety about meeting financial commitments, and 19% said the problems left them uncertain about their company’s future.
Atkinson said: “While many SMEs show resilience, we cannot ignore the emotional toll that cash flow disruption brings.
“Stress, frustration and uncertainty can build quickly when late payments or unexpected costs hit. That’s why timely support, alongside funding solutions, is so important.”
Government figures suggest the UK is home to 5.5 million private sector businesses, 99.8% of which are SMEs.
“If the survey findings were applied nationally, nearly two million SME leaders may not fully understand what cash flow is, despite most grappling with it several times each year.
“This pressure is reflected in search behaviour, with Google reporting an 80% rise in searches for ‘small business cash flow management’ year-on-year.
“The study found that 18% of SMEs look online for advice when facing challenges, highlighting a shift towards digital sources of support.
Atkinson said Novuna Business Cash Flow sees its role as providing both finance and guidance.
He said: “At Novuna Business Cash Flow, we see our role as more than providing finance. We’re here to help businesses gain clarity, reduce uncertainty and take control of their cash flow.
“That’s why we now offer practical support – from outsourced credit control to digital tools like our invoice generator – giving SMEs solutions that directly address cash flow pressures.
“By combining funding with these services, we can support SMEs to move from simply coping with the kinds of cash flow pressures highlighted in our research, to managing them with greater confidence.”
