Managing cash flow in the food and drink sector

The main business concern of SMEs within the food and drink sector has been revealed by the Close Brothers Business Barometer, which seeks the opinion of over 900 SMEs across the UK and Ireland. The majority of companies in the food and drink industry surveyed cited cash flow as the main issue they are facing.

Cash flow restrictions

Almost 10% of companies in the food and drink industry consider restricted cash flow their primary barrier to business growth.

Having a healthy and predictable cash flow is important to fund not only the day-to-day running of a business, such as producing stock while waiting for payment, but also to drive change and expansion of firms.

Late payments are an issue

Late payments are a contributing factor to restricted cash flow, a well-known issue affecting businesses across the UK and Ireland. 45% of food and drink companies who have a problem with customers paying slowly say it makes cash flow difficult to manage.

The Business Barometer has also brought to light that firms can be owed up to a substantial £40,000 in late payments.

Stabilise your cash flow

Invoice finance offers a way of regulating your cash flow by unlocking up to 90% of your unpaid invoices the moment they are raised. This will free up working capital to invest in business growth and strategic goals.

Tips for businesses wanting to grow and expand using invoice finance:

Monitor Cash Flow: Regularly review and forecast your cash flow. This helps in optimising the use of invoice finance and identifying potential shortfalls in advance. Spend some time mapping out a realistic forecast of the forthcoming year, paying particular attention to times where a salary run or bill payments clash with dates you are due to receive payment.
Use Funds Strategically: Use the immediate cash flow boost to invest in areas that yield high returns, like bulk purchasing of raw materials at discounted rates, or expanding production capacity.
Reinvest in Business Growth: Utilise the unlocked funds to finance marketing campaigns, R&D, or expansion initiatives, ensuring you're constantly reaching new markets and customers.
Ease the strain on your business. Consider a factoring solution if you wish to outsource the collection of payments to a third party. This will allow you to focus on the day-to-day running of your business. Factoring is the ideal solution for businesses looking to save time chasing payments.
Choose the Right Partner: Not all invoice finance providers are the same. Do thorough research and pick one that understands the food and drink industry and offers terms that fit your business model.