As anyone who’s ever started up a small business knows, it’s hard. First, you have to have a business idea. Then you have to sort out premises, maybe employ staff, and start getting in the business. But that’s just the beginning of it all. Soon comes the time to both run the enterprise itself and look after all of the admin like keeping accurate books and making sure all the relevant taxes and other financial obligations are paid.

All this has to be done against the backdrop of having to handle the cash flow for your business. Getting the money in on time is a perennial problem for the small business owner. Because of the relative newness of the business, it’s unlikely to have built up cash reserves while its small size and the delicacy of its relationships means it can’t throw its weight about much demanding payment from clients.

So often it’s simple lack of available cash that does it for may small businesses. According to business analysts CB Insights, cash flow is the second most common reason businesses fail with the first being a lack of demand for their product or service.

But there are steps that a business can take to mitigate against cashflow problems – and here are three that can be surprisingly effective.

Cut down your personal overheads

It’s always going to be tough starting a new business and there are inevitably sacrifices that are going to be made. This will probably include the business owner acknowledging that they will have to work on a relatively low salary, to begin with at least, in order to build up cash reserves for their business. This means looking at their own personal finances to trim their own expenses as much as possible. As their mortgage is likely to be one of their biggest monthly expenses, this could be the first thing to look at.  By getting expert advice from someone like online advisor Trussle for free mortgage advice it might be possible to cut a significant amount from your monthly financial obligations – money that could then stay within the business.

Use invoice factoring

This is another method used by a growing number of smaller businesses to smooth out their cashflow issues. Sometimes also known as invoice financing, invoice factoring is the process by which a business effectively takes out a loan from an invoice factoring company against outstanding invoices. A large proportion of the invoice amount is paid straight away, with the balance minus an administration fee paid when the client settles the invoice in full. It does mean getting less than the total amount but this can be offset by the advantages for the small business of being paid immediately.


Often, small businesses go under because they’ve accepted the status quo. But going to suppliers and clients and negotiating more practical timescales for payment is sometimes all that’s needed to get some breathing room. 

Hopefully, if you ever find yourself in this position, the above advice will help. And remember, be optimistic. It’s always the failures that hit the headlines, but over 80% of new start-ups are still thriving after their first year of business.