Cashflow resilience and keeping suppliers on side

Cashflow management sits at the centre of most businesses, dictating their growth and success in an ever-changing economic landscape. It means the business can plan for an unexpected increase or decrease in demand, or respond to changes within the wider economic climate.

Businesses often face a dichotomy in cashflow management: how to stay resilient during lean periods and how to optimise returns during peak times.

“Slower periods are normal for every business, but the right preparation will limit how deeply periods of low cashflow affect the business. For example, maintaining a cash reserve will ensure the business has a financial buffer and can keep on top of outgoing bills,” says Stacey Sterbenz, general manager, UK Commercial at American Express.

Cashflow analysis is an important first step in your strategy as it provides a comprehensive view of how cash moves through a business,” Sterbenz adds. “It will identify the current cash balance, plus the business’ inflows and minus its outflows, giving businesses and finance teams a better understanding of possible worst- and best-case scenarios,” she says.

This visibility allows business owners to create an action plan for these scenarios, such as liquidating long-term assets to release cash into the business.

In lean periods, the focus is often on intelligent resource allocation. This involves revisiting budget allocations, renegotiating contracts, and perhaps most crucially, engaging in proactive communication with stakeholders.

During peak seasons, the strategy pivots to leveraging the influx of cash. This might include investment in inventory management systems or technology that can streamline operations, coupled with robust cashflow forecasting to predict and prepare for future financial scenarios.

In both cases, maintaining a cash reserve becomes a vital safety net, acting as a buffer for unforeseen financial challenges.

Research conducted by American Express reveals for four in ten (39%) UK finance leaders, slow and late payments are a top cause of cashflow concerns.[1] Having positive cashflow means that the business is adequately capitalised, able to pay bills on time and can maintain a good relationship with its suppliers and stakeholders.

Late payments cause more demands on employee time, and give finance leaders less cashflow visibility, which can make it more difficult for the business to accurately plan.  Slow and late payments can also limit a company’s ability to secure more capital to stimulate growth, impacting long-term profitability.

Revolutionising cashflow with payment innovation and partnerships

In today’s digital age, the adoption of advanced payment systems has become a necessity for improving cashflow. These systems offer faster payment processing and reduce the time taken to chase payments, thereby improving the overall financial health of the business.

“Efficient payment systems play a crucial role in enhancing cashflow management, and businesses that embrace digitally driven payment systems can streamline transactions, ensuring quick and secure customer payments,” says Sterbenz.

“This not only reduces the time it takes to send and receive payments, but also empowers businesses to redirect team effort towards more strategic tasks, boosting overall company efficiency. The faster processing of payments also gives businesses greater visibility over their finances.”

Moreover, forming strategic partnerships with payment companies can provide businesses with tailored solutions that cater to specific cashflow needs. For instance, some businesses might benefit from a partnership with a company specialising in automated invoicing, while others might find a solution in contactless payment technologies.

“Choosing a payment partner that works with both buyer and supplier offers businesses a competitive advantage by offering control over every part of the payment process and giving them a complete view of their spend,” adds Sterbenz.

“Businesses should also take advantage of enhanced credit terms so they can hold onto cash for longer, without this influencing supplier relationships.”

Strengthening supplier bonds through timely payments

The way a business handles payments to its suppliers speaks volumes about its values and operational efficiency. Fast and reliable payments can greatly enhance a business’s reputation among its suppliers.

According to Sterbenz, more than a third (37%) of senior UK finance leaders and decision makers claim that late or slow payments negatively impact their relationships with suppliers.

“Strong supplier relationships that are built on effective communication and prioritise on-time payments can make all the difference for a business, and having visibility over incoming payments allows businesses to accurately project cashflow, optimise expenses and maximise working capital,” Sterbenz concludes.

Adopting electronic payment methods not only speeds up the transaction process but also provides a clear, traceable record of payments. Automated payment systems can further streamline this process, ensuring that payments are made consistently and on time, which is critical in maintaining a healthy supply chain.

A symphony of financial strategies for business success

Managing cashflow effectively throughout the year is akin to conducting a symphony. It requires an understanding of the different elements at play and the ability to bring them together harmoniously.

The incorporation of efficient payment systems and the fostering of strong supplier relationships are crucial components in this orchestra.

These elements not only ensure financial stability but also contribute to the overall reputation and long-term success of a business. In the world of business, cashflow management is an ongoing strategy, not just a financial objective.

From secure and efficient virtual payments to simple reconciliation processes and much more, American Express Corporate Solutions keep your business moving. Find out more about how our payment solutions can help.

American Express Services Europe Limited has its registered office at Belgrave House, 76 Buckingham Palace Road, London, SW1W 9AX, UK. It is registered in England and Wales with Company Number 1833139 and authorised and regulated by the Financial Conduct Authority.

[1] American Express and Opinium surveyed 750 respondents from UK small, medium, and large companies, split across senior decision makers, senior finance professionals and finance team members who are responsible for payments. Fieldwork was undertaken between 15-23 May 2023.

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