1 in 3 UK SME leaders don’t fully understand cash flow

By Vriti Gothi

A third of UK SME leaders do not fully understand what cash flow means, even though more than 80% say they have experienced related financial pressures, according to new research from Novuna Business Cash Flow. The survey, which polled 1,000 SME decision-makers, highlights a disconnect between awareness of financial challenges and confidence in managing them.

The results come amid a muted economic outlook following the Autumn Budget, adding greater strain on smaller firms that already face recurring payment delays and shifting trading conditions. The findings suggest that cash flow issues are not occasional but structural, occurring an average of 7.4 times a year for affected businesses.

Late customer payments (36%) and seasonal drops in income (35%) were the most common triggers. Economic uncertainty also played a role, with more than a quarter citing sudden changes in trading conditions. Medium-sized businesses reported the highest frequency of disruption, almost reaching 10 instances annually.

Despite the frequency of problems, more than half of SMEs still rely on short-term responses such as reducing costs, taking on loans, or borrowing from personal networks. Only a small proportion turn to longer-term options like invoice finance (11%) or outsourced credit management (5%).

“These figures show that cash flow problems are not occasional – they’re part of the everyday reality for most SMEs,” said John Atkinson, Head of Commercial and Strategy at Novuna Business Cash Flow. “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.”

The emotional impact is also notable. Nearly one in four SME leaders reported stress or anxiety linked to managing payments, while one in five said cash flow uncertainty left them questioning the future viability of their business.

The broader implications are significant. Government data shows the UK has 5.5 million private sector businesses, 99.8% of which are SMEs. Applied nationally, the survey suggests nearly two million SME leaders may not fully understand cash flow, despite facing frequent disruption.

Search data further reflects mounting concern: online queries related to small business cash flow management have risen 80% year-on-year, reinforcing the demand for guidance and support.

The research underscores the need for both financial solutions and broader support systems to help SMEs build confidence in managing liquidity. As economic conditions remain uncertain, the ability to maintain predictable inflows and avoid reactive decision-making will be central to business resilience.