Cash flow is a constant concern for small businesses. Is that big client going to pay the invoice on time? Is there going to be enough liquidity to purchase stock or raw materials? How much money needs to be available in your bank account at the end of the month to ensure you can pay all your expenses? Cash flow is the oil that makes the gears of a business function.
According to data released by the National Treasury, South Africa’s SMEs are caught in a cash flow crisis, with R12,4 billion in government invoices left unpaid beyond 30 days. In the private sector, payment cycles of 90-120 days are standard. The end-to-end cash cycle for an SME supplying large corporates can exceed 150 days once order times, delivery, invoicing and extended payment terms are factored in.
A 2025 survey concluded that 43% of small businesses consider cash flow a problem, with 74% of them stating that it has worsened or stayed the same over the last year.
Causes for Cash Flow Problems
Cash flow challenges can mean the difference between life and death for a small business. A lack of liquid capital creates a gap that prevents a business from taking on a new contract, hiring new employees (whom they might desperately need), or even staying afloat.
Numerous factors cause this issue, but they can be divided into the following:
Delayed Payments
Some clients might find themselves paying later than planned. When you are waiting on them to send you the fee for work completed or products delivered, this messes with your cash flow. It even prevents you from paying your debtors.
Over-investment in Inventory
Having too much inventory that is moving slowly can be a disadvantage. It means that the cash value of your sales is “locked” in inventory until you sell your products. This is why planning and forecasting are so important.
Unexpected Expenses
This problem is one that all of us have experienced at least once before, specifically in our personal lives. Let’s look at an example: Your budget is in order, you are saving where you should, and then the worst happens… Your car breaks down. The pipe bursts. Suddenly, you have to fork up cash to fix a problem that you didn’t plan for.
This happens in business, too.
Repairs to equipment, legal fees, human error, or supply chain disruptions can significantly impact your bottom line when they suddenly appear.
Lack of Cash Reserves
Cash reserves can be seen as that buffer in your bank account that allows you to cover monthly expenses, without even worrying about going into the red. When unforeseen events or delayed payments occur, reserves help you cover costs.
Rapid, Unmanaged Growth
Yes, growth can be bad for your cash flow.
Growth is something every business wants; you want to have more clients and sales, even if it means you need to employ additional people. When you find yourself in this situation, it means that you might need to invest more in more hires or stock in the short-term, to keep up with the long-term demand.
Cash flow becomes constrained in the short-term, but you have to see it through for long-term results. This is where a bridging loan, for instance, can be ideal.
Poor Financial Planning
Accuracy is everything when it comes to financial planning. Ambitious forecasts, inaccurate record-keeping and expenses that are estimated, not confirmed, all lead to miscalculations and prevent sound decision-making.
Decline in Sales or Profitability
Perhaps the most well-known cause of cash flow constraints, a decline in sales or profitability, is perhaps the only cause that you can be sure will be ever-present. Market changes, seasonal shifts, or an increase in competition are all inevitable. Therefore, financial planning is even more important.
Experts Weigh In
Experts on the frontline of SME funding agree that technology can help business owners overcome cash flow challenges.
Alan Shannon, a Nedbank Executive for Private Wealth, Private Clients and Small Business, notes that two aspects in digital transformation play a key role in changing the condition of a business’s cash flow: digital payments and digital record-keeping tools
“Across Africa, consumer behaviour is steadily evolving. Increasingly, customers expect the convenience and security of digital payment options. For small businesses, the ability to accept electronic payments is no longer simply a convenience; it is becoming an important part of remaining competitive,” he explains. “Digital payment acceptance creates a record of sales activity, enabling better financial management and helping businesses understand patterns in customer behaviour. Over time, this information can support more informed decision-making, from inventory management to growth planning.”
According to Shannon, inaccurate record-keeping and manual reconciliation processes can create unnecessary administrative burdens for already stretched business owners.
“Digital tools that streamline payments and record transactions automatically can reduce these inefficiencies, allowing entrepreneurs to focus their time and energy where it matters most: running and growing their businesses,” Shannon states.
Various cloud-based record-keeping software enable small business owners to practice sound financial planning and keep a better eye on their financial gains and losses.
Daniel Goldberg, Founder and CEO of Bridgement, shares that technology can simplify SME payments and liquidity – especially when it comes to applying for funding.
“[Technology allows funders to] plug directly into the accounting and banking tools SMEs already use and understand their businesses in real time,” he shares. It allows funders such as Bridgement to provide the right level of funding at the right moment.
For instance, combining banking and accounting data with Bridgement’s proprietary credit-scoring models, funders can make faster decisions, tailor limits to each client’s actual trading patterns, and offer dynamic facilities that grow as the business grows. “For SME owners, this means less time spent on paperwork and more time serving customers and building their companies while effectively overcoming the payment gap,” Goldberg concludes.
A lot is spoken about when it comes to SMEs. They are often celebrated for their resilience and ability to grow in spite of many challenges, but that doesn’t mean that this resilience is easily earned. The onus remains on the entrepreneur to continuously improve, learn and see how they can streamline their businesses, such as improved cash flow management.
