Navigating Cash flow challenges in SMEs: The strategic value of Part-Time CFO expertise

Michel P.
Oct 3
3 min read

Cash flow failure remains the primary killer of small and medium-sized enterprises. Unlike profitability issues that reveal themselves gradually, cash flow problems can destroy an otherwise healthy business within weeks.

The paradox is stark: a company can be profitable on paper while simultaneously running out of cash to meet payroll or pay suppliers. This disconnect between profit and cash is where many SMEs find themselves vulnerable.

Root Causes: Why Cash Flow Problems Develop

Operational Timing Gaps - When clients stretch payment terms to 60 or 90 days while suppliers demand payment in 30, the gap must be funded from somewhere.

Growth Without Infrastructure - Each new sale requires upfront investment before payment arrives. Without adequate working capital, success can paradoxically accelerate failure.

Invisible Cash Drains - Excess inventory, underperforming product lines, and recurring expenses steadily erode cash position, often escaping attention until a detailed review reveals the damage.

Forecast Optimism - Revenue projections based on hope rather than data lead to overspending. When sales fail to materialize on schedule, committed cash becomes a liability.

External Shocks - Economic downturns, supply chain disruptions, and interest rate changes can rapidly transform stability into crisis.

The Part-Time CFO Advantage

Most SMEs need sophisticated financial expertise but cannot justify the £100,000+ cost of a full-time CFO. A part-time CFO delivers executive-level leadership scaled to your needs and budget.

Forward-Looking Cash Flow Management - Rolling 13-week projections accounting for seasonality and payment patterns enable proactive decisions rather than reactive crisis management.

Intelligent Cost Analysis - Distinguishing between growth investments and cash-consuming costs, then restructuring spending to protect reserves.

Actionable Intelligence - Translating financial data into strategic insights with specific recommended actions.

Risk Mitigation - Systematically identifying vulnerabilities from customer concentration to debt covenants before they become crises.

Strategic Capital Planning - Ensuring capital decisions support long-term objectives while maintaining stability.

Lessons From the Field

Ground Control Success - This UK communications provider reduced overdue debt from 22% to 8% and unlocked over £900,000 in operating cash flow through structured financial systems and disciplined management.

Carillion's Collapse - Despite £5 billion in revenue, Carillion collapsed in 2018 with just £29 million in cash. Years of aggressive accounting and inadequate forecasting created a hollow shell that appeared successful until it imploded. Proper oversight would have demanded action years earlier.

Building Cash Flow Resilience

Create a Cash Runway - Maintain three to six months of operating expenses as reserves for breathing room and negotiating leverage.

Accelerate Collections - Implement automated invoicing, payment reminders, and systematic escalation of overdue accounts.

Optimize Payment Timing - Pay suppliers on due dates and negotiate extended terms where possible.

Monthly Health Checks - Review actuals versus projections to detect problems early.

Reduce Revenue Concentration - Diversify your customer base to spread risk.

Align Payment Cycles - Structure terms to minimize the funding gap and reduce working capital requirements.

Taking Action

Cash flow challenges are inevitable, but cash flow failure is preventable. The difference lies in having the expertise and discipline to manage cash proactively.

A part-time CFO provides strategic financial leadership calibrated to your growth stage and budget. Rather than learning expensive lessons through trial and error, you benefit from proven frameworks applied to your specific situation.

Ready to strengthen your cash flow management? Contact us at contact@savia.com to discuss how part-time CFO expertise can transform your financial resilience.

Sources:

Ground Control Case Study. Sage Advice UK
Carillion Collapse Overview. Wikipedia
"80% of UK SMEs Experienced a Cash Flow Crisis Last Year." Law Donut
"Why Do SMEs Struggle with Cash Flow Management?" PM+M
"The Rise of Part-Time CFOs: Tailored Financial Leadership." Accountancy Capital