You may have the most promising small business, but no matter how great the idea behind it is, how profitable you are, or how many interested investors you have, if your company's cash flow is in trouble, your business won't survive long. This is because growing companies need cash.

A study from the financial services company, U.S. Bank, found that as many as 82% of startups and small businesses fail due to poor cash flow management. Relentless optimism may often be a driving factor in cash flow issues with overestimations of future sales leading to overproduction and overspending. Add to that a laid back approach to overdue receivables and you have yourself a recipe for disaster.

When you have more cash flowing out of your business than coming in, you may find it difficult to pay your debts and cover other expenses. However, net cash outflows don't necessarily indicate that you have a cash flow problem. Cash flow only becomes an issue when your outflows exceed inflows and you use up your cash reserve.

Cash flow problems can be especially trying for Small and Medium sized Enterprises (SMEs). While SMEs can survive longer than you might think without a profit, liquidity is their life blood. Liquidity is an entity's ability to meet its immediate or short-term debts. A useful tool to assess your entity's liquidity is a working capital report. And liquidity and cash flow are inevitably linked as cash is the most liquid of your assets.

A healthy and consistent cash flow position creates liquidity for your business, enabling you to sustain your operations and generate profits. Profits, in turn, enable re-investment, and, ultimately, growth. So, monitoring your cash flow and ensuring you have enough cash to make critical payments is crucial.

Some of the results of mismanaged cash flow include:

Managing your cash flow isn't impossible though. Here are 5 top tips to prevent cash flow problems before they even arise.

One of the best ways to take control of your cash flow is to forecast it. This way, you can plan for potential problems before they arise. It helps to use multiple different projections:

The different options show different possibilities that you can plan for. You may not want to consider the worst-case scenario but it's always better to have a contingency plan in place - just in case. You can use Syft's Cash Manager for your projections.

Many companies experience cash flow problems unique to the seasons. If you are a business that sells children's toys, your inflow of cash will likely increase around the Christmas period. This means that the demand at the end of the year will be great and will lead to increased production, which in turn leads to an uptick in your expenditure. You will likely need to pay the costs of production, staff overtime, and so on, before you see any money coming in.

Debtors also often take longer to pay around the festive season, which means you may spend longer than usual waiting for invoices to be paid, depleting your available cash. You need to plan ahead for such possibilities so that you aren't stuck with a major cash flow headache at Christmas time.

You could think about diversifying your trading activities to even out seasonal trading patterns, or delay supplier payments where possible to save your cash when you most need it.

In the EU, 19% of all invoices are paid late, 42% of all companies lose income to debtors, and 14% are afraid of bankruptcy as a result of late payments or unpaid invoices. On average, European companies had to write off 2.31% of their revenue as a consequence of payment defaults in 2019, up 1.69% from 2018.

So, if there's one sure way to improve your cash flow situation, it's getting on top of those unpaid invoices. To do this, it helps to invoice customers as quickly as possible and confirm that they have received your invoice.

If someone is taking long to pay you, it may be worth sending them an email as a reminder or even making a courtesy call. It's possible they may simply have forgotten and your prompting was all that they needed to pay off their debt. You can also make use of invoicing software to automate this process, saving you time and making sure that the management of invoices is consistent and efficient.

You don't have to wait for invoices to be overdue before you take action though! There is a way to nip this problem in the bud.

Ask new customers for a deposit or partial payment, start sending invoices early, send invoices more frequently, make it convenient for clients to pay. You can also offer discounts to customers who pay within a certain time-frame, which will help you get your money in faster.

It can help to include payment terms on every invoice you send out. For instance, you could include things like penalties for late payment which may aid in your invoices being paid in good time.

Inadequately managed stock can lead you to over-order stock, which then ends up being obsolete or in excess of customer demand. This then means that your cash is tied up in unsellable items. So, it's vital that you keep track of inventory and inventory demand.

It can help to look at previous sales patterns to make a call as to which products will likely be in demand in the near future. This can also prevent you from under-ordering stock and missing out on great opportunities for sales. It may also help you to switch suppliers as your current suppliers may be charging you more than others would.

Cash flow is something that concerns most SMEs, but it needn't be. With the help of regular cash flow forecasts, a consideration of seasonal cash flow, better management of unpaid invoices, incentives for customers to pay earlier, and better inventory management, you can crush those cash flow concerns. And if you are finding this too challenging to manage by yourself, it may be worth your while to speak to an accountant or financial advisor to help you manage your cash.