Despite improving inflation figures, many UK SMEs are entering 2026 under sust
ained cash flow pressure.
Recent commentary from the Federation of Small Businesses and British Chambers of Commerce highlights a recurring theme: profitability does not guarantee liquidity.
Late payments remain a key issue. Larger customers continue to extend payment terms, while SMEs absorb rising wage and supplier costs upfront. For growing businesses, this mismatch between income and outgoings can create acute short-term stress.
Another factor is tax timing. January corporation tax payments, VAT liabilities and self-assessment settlements often converge, placing pressure on reserves. Businesses that have not actively forecast cash flow beyond headline profit figures can find themselves reliant on overdrafts or short-term finance.
February is an ideal time to reset cash management. Reviewing debtor days, payment terms, and stock levels can release cash quickly without damaging operations. Equally important is scenario planning: understanding how a delayed payment or unexpected cost would affect liquidity.
Accountants increasingly advise clients to treat cash flow forecasting as a rolling management tool rather than a static spreadsheet. Those that do are far better placed to negotiate with lenders, suppliers and HMRC if issues arise.
Learn why cash flow planning is critical to your business. Book a cash flow forecasting and resilience review