Cash first blueprint for SME that want to survive and scale
Hi, I’m Aby
Welcome to The Strategic Billion Dollar PEN, your weekly business strategy newsletter designed to equip SME business owners and entrepreneurs with the clarity, confidence, and competitive edge to grow and scale with purpose—successfully.
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Stop Running Out of Cash: A Practical Blueprint for SMEs
Cash flow and liquidity are the lifeblood of SME success. In this series on cash and liquidity management (focus keyword: SME cash preservation), we show how SME owners and entrepreneurs can treat cash and liquidity as strategic levers to build competitive advantage and scale their businesses.
We share practical, actionable steps to help SMEs avoid running out of cash — a leading cause of business failure. Read other newsletters in this series: SME Cash Flow and Liquidity Management Strategies and SME Working Capital Blueprint.
In this third instalment of our series focuses on cash preservation: how to curb outflows and accelerate inflows. Preservation becomes critical when a business faces urgent external shocks such as Covid or the 2008 financial crisis, when it lacks the cash needed to operate, or when a start-up is burning cash faster than expected. In short, this series is for businesses that must restore solvency because of external or internal pressures.
We draw on insights from the McKinsey Podcast Cash Preservation Response to Covid and the article Calculating How Long Your Cash Is Going to Last from AccountingTools.com.
Strategic Cash Management Blueprint for Resilient SMEs
Cash First or Bust: The SME Survival Guide
This blueprint highlights best practices to implement to preserve cash. It lays out a practical, action oriented playbook for SME owners and entrepreneurs who need to protect liquidity quickly and sustainably.
1. Establish a cash flow working group
SME business owners or entrepreneurs should establish a process for reviewing the liquidity of the business with the right person or people that have the responsibility to act on any immediate information for the next group meeting. This group will supersedes the normally financial reporting of the business which is looking at profit and loss statements to run the business but instead focus on cash flow and liquidity
SME Takeaway:
Cash flow working group: Form a cross-functional liquidity team with authority to monitor cash daily and execute decisions.
2. Develop real time cash flow forecasting
Set up a process to track the liquidity of the business. hourly, daily or weekly basis . There is update frequently to quickly diagnose the severity of the liquidity positions and monitor changes
This provides a clear picture of the company’s cash runway or how long it can operate under various stress scenarios
SME Takeaway:
Implement real-time cash forecasts (hourly/daily/weekly) with runway scenarios and trigger thresholds.
3. Take decisive and immediate action to reduce spend
The goal is to review all the business spending and put a stop to this and communicate to everyone. Focus on reducing all operating expenses e.g marketing, travelling etc all spends must be stopped except essential spending .
All capital expenditures must be cancelled or delayed also any recruiting including incentives. Immediately freeze non-essential spending, capital projects, and hiring; permit only essential expenses.
4. Optimise net working capital NWC
The aim is to focus on stabilizing long term cash by:
Optimizing Receivables – aggressively but judiciously pursuing overdue customer payments.
Managing Payables – the goal is to strategically lengthening payments terms with suppliers where possible without damaging critical relationships and
Controlling Inventory by minimizing inventory on hand and slow moving or obsolete stock.
SME Takeaway:
Accelerate collections, negotiate extended supplier terms, and liquidate slow-moving inventory to free cash.
5. Explore external funding and balance sheet measures
Review all existing lines of credit , explore new financing options and proactively communicate with lenders to discuss potential debt covenant relief or renegotiate before a crisis hits
SME Takeaway:
Audit credit lines, engage lenders proactively, and secure contingency financing before cash tightens.
Flight 78910™ SME Spotlight: MaryRuth Ghiyam Organics
WATCH Video Feature: From $700K in Debt to $100 Million Selling Vitamins
MaryRuth, a budding SME owner, faced the twin challenge of growing her business while managing personal debt. She decided to build the company using only cash and to preserve liquidity at every step, applying cash preservation best practices.
She selected suppliers who could deliver the minimum viable quality she could afford, adopted lean operations and bare bones expenses (no employees, no paid marketing), and reinvested every sale back into the business. She marketed the product herself and ploughed the cash back into growth.
Over time this approach generated enough cash and liquidity to cover day to day operations, pay down debt, and invest in the future, ultimately scaling the business into a successful nine figure company with a large, loyal customer base.
Highlights for SME Business Owners
- Operating model: Move from one to one sales to scalable product distribution (e.g., online marketplaces) to reach a broader customer base.
- Differentiation: Build a high quality product, pair it with strong customer care, and use social media to promote the brand.
- Forecast cash needs: Create a customer acquisition plan that aligns with cash requirements to grow revenue and repay debt incrementally.
- Cash management: Negotiate supplier terms to create a negative cash conversion cycle, so sales cash funds operations before payables are due.
- Inventory: Invest only what cash allows, use cash based supplier relationships, and apply just-in-time inventory to avoid tying up liquidity.
- Operating expenses: Minimise overhead early (founder run operations, no marketing spend) and reinvest all available cash into growth.
- Capital expenditure: Delay non essential capital spending until the business is cash stable.
- Financial management: Adopt conservative cash and liquidity management, reinvesting earnings to build stability before seeking outside investment.
Strategic Takeaway
SME owners and entrepreneurs should create proactive financial management, especially when anticipating economic challenges. These frameworks help achieve that when applied proactively.
The levers used to optimise cash combine accounting and financial measures — operating expenses, capital expenditures, balance-sheet actions, and working capital management — together with detailed cash-flow modelling and, where necessary, temporary pay adjustments or suspension of discretionary compensation [2].
The goal is to act quickly and decisively, using scenario analysis to estimate cash runway and assess potential impacts on the business. More on SME cash flow & liquidity management strategies.
Apply the Playbook
Every Blueprint and Spotlight in this newsletter is a strategic lever.
Which one will you use to build a stronger, more competitive SME?
Conclusion
Adopt a cash first policy with a dedicated cash flow working group, real time forecasting and trigger points, and a protocol to act quickly on runway risks; embed it across teams, measure DSO/DPO/cash conversion cycle, align incentives to cash outcomes, and prioritise reinvesting operating cash—MaryRuth’s disciplined approach shows this turns cash preservation into a strategic growth advantage.
Continue your growth trajectory by exploring the next newsletter—packed with SME Cash strategies
References
- Creating a cash culture in response to COVID-19 | McKinsey
- Calculating How Long Your Cash Will Last (#350) — AccountingTools
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Set bold strategy. Set big targets. Take massive action. Measure what matters.
About the Author
Aby Rufus
Business Investor Strategy Expert Entrepreneur with an MBA in Strategic Planning—offering billion-dollar strategic solutions for SMEs.
