GUEST COLUMN:
Dan Mines
Co-founder
MENNA
A new year can feel full of hope for small business owners. Maybe your business has a strong pipeline of projects, or you were expecting regular trade to pick back up quickly. What happens when things actually start more slowly than normal?
Come February, you are feeling the gap between what you expected and what’s actually coming in. Cash flow starts to feel fragile.
It doesn’t matter whether you run a shop in Cardiff, hairdressing salon in Aberystwyth, or plumbing firm in North Wales – February can prove a pressure point for your business’ financial health.
This makes it a crucial time of the year to check your company’s financial health.
First, let’s take a step back and consider the bigger picture. I’m writing this just as MPs on the Business and Trade Committee have published new analysis showing small businesses are operating under pressures rivalling those experienced during the Covid pandemic – sometimes worse. The difference now being that there is no big bang pandemic-style source of coordinated support to ease these pressures. It can feel very lonely at the helm of your own business.
A lack of access to business credit is one of the greatest hurdles. I know this from the businesses I speak to everyday in my role of co-founder of Menna, which exists to support SME owners.
My experiences are backed up by statistics: the Bank of England has identified a £22 billion SME funding gap and a 20% decline in lending in real terms in the past decade. Loan acceptance rates now stand at less than 50%.
At the same time, late payments are crippling many of our most promising businesses. Paying late has become worryingly normalised in the UK. Late payments are to blame for the closure of some 14,000 businesses each year.
These challenges often start to come to a head in February. It often marks the point where corporate distress begins to accelerate significantly before insolvencies peak a few months later.
It is also often around now that businesses realise their cash flow isn’t matching with their pipeline or sales expectations. Pipelines that looked busy in January haven’t converted into cash yet – but tax, VAT, supplier bills and rent are all very real.
All is not lost. If you can, consider this a month to get ahead of these pressures. It’s an opportunity to thoroughly analyse your business’s financial health and identify what needs to be done to improve it. You can start with four simple financial checks:
1. Get clear on your cashflow pattern
A simple cashflow check in February gives you a clearer picture of what the next few months will feel like and what needs adjusting before it becomes urgent. Don’t just track invoices; consider when money tends to arrive and leave.
Even healthy businesses can run into issues if customer payments are late, or if key costs like payroll, VAT, rent, or suppliers hit all at once. Aim to spot pinch points early so you can plan around them.
2. Check your credit access before you need it
You may assume that if cash ever gets tight, you can just arrange funding when the time comes. But when cash flow starts tightening, lenders often become more cautious, and may reduce what they’re willing to offer. Having options lined up early gives you more control.
Part of the problem is that many small firms struggle to understand how they are assessed by lenders. Another – one I see first-hand – is that small business owners are often left behind by systems designed for larger organisations. We started Menna to change that, giving small businesses clear visibility of their credit position and practical guidance on how to improve it, long before funding is needed.
3. Stress-test your costs
As a small business owner who wears many hats, it can be easy to lose track of costs.
February is the time to take action. Look at what your business must pay out over the next few months, before things get busy again or cash gets tighter. That means reviewing payments, rent, payroll, tax and any annual renewals that might be coming up.
A quick review now can reveal where you could renegotiate terms, spread payments, or cut costs that aren’t essential.
4. Take a close look at your customers and suppliers
Late payments from B2B customers or missed deliveries of stock or services can dramatically affect your business.
So, even if you are being diligent, you can quickly be caught out by things out of your control. Large business track customers and supply changes with expensive credit risk monitoring tools that often out of the reach of SMEs. At Menna we’re working to bridge the gap by helping you monitor the credit risk of your customers and suppliers.
If you undertake these financial checks, as a minimum, then you can avoid the February chokepoint and change it into a month when your business becomes healthier than ever.
