One in three SME leaders do not fully understand cash flow, despite 82% facing cash flow problems

Cash flow is often described as the engine that keeps a business moving, yet new research from Novuna Business Cash Flow - specialists in SME and corporate cash flow finance - shows that many leaders are unclear on what it really means. A survey of 1,000 SME decision makers found that a third were unable to correctly define cash flow, even though the majority said they had faced cash flow problems within their business.

The findings come at a time when the Autumn Budget has set out a cautious economic outlook for UK companies, adding further pressure to the already challenging environment in which many SMEs are operating. This gap between knowledge and day-to-day experience highlights the scale of the challenge for UK SMEs. It also underlines the importance of providing not only financial support, but also the guidance and tools that enable businesses to navigate periods of pressure with confidence.

More than 8 in 10 SMEs face cash flow problems

The study revealed that 82% of SMEs have encountered cash flow difficulties, with late customer payments (36%) and seasonal shifts in sales (35%) the most common triggers. Broader economic uncertainty was also a factor, with more than a quarter (27%) citing unexpected changes in trading conditions as a cause of disruption.

Small and medium-sized firms were the most likely to report difficulties (91% and 90% respectively), followed by micro businesses (84%). Even among sole traders, two-thirds (68%) had been affected. On average, SMEs said they experienced cash flow issues 7.4 times a year, with medium-sized firms almost reaching ten separate instances annually. Yet more than half of SMEs (55%) still rely on short-term fixes - most commonly cutting costs, taking out loans or borrowing from friends and family - while only a minority turn to longer-term options such as invoice finance (11%) or outsourced credit control (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."

One in four SME leaders feel stressed about cash flow

The research also explored how decision makers respond when disruption occurs. A third (33%) said they feel confident in managing issues when they arise, while more than a quarter (28%) said cash flow pressures motivate them to strengthen their financial planning.

But for others, the strain is significant. Almost a quarter (24%) admitted to feeling stressed or anxious about meeting financial obligations, while one in five (19%) said cash flow worries left them uncertain about the future of their business.

John continued: "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."

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UK's 5.5 million SMEs face ongoing cash flow challenges

According to government figures, the UK is home to 5.5 million private sector businesses, 99.8% of which are SMEs. If the survey results are applied nationally, that would mean almost two million SME leaders across the country may not fully understand what cash flow is - despite most of them experiencing problems several times a year.

This rising pressure is also reflected in online behaviour. Search trend data from Google shows that searches for “small business cash flow management” have risen by 80% year-on-year, highlighting the growing number of SMEs seeking guidance on how to manage cash flow more effectively. The survey also found that one in five SMEs (18%) look online for advice when facing cash flow pressures - reinforcing the shift towards digital information-seeking.

Helping SMEs build confidence in cash flow

John concluded: "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."

Beyond the findings, this research highlights a wider truth: cash flow remains one of the most pressing issues facing UK SMEs, yet it is still often misunderstood or underestimated. By shining a light on both the knowledge gap and the frequency of disruption, Novuna Business Cash Flow hopes to encourage business leaders to plan more effectively.

As SMEs continue to drive growth across the UK economy, giving them the tools and confidence to manage cash flow will be vital in building resilience and seizing future opportunities.