Financial threats to SMEs are as likely to happen as physical threats, and in the whirlwind of keeping customers happy, ensuring you’re trading effectively, and paying suppliers on time, there are things that fall by the wayside. But these areas you previously hadn’t paid much attention to can suddenly become problems you can no longer ignore.

Overspending and poor cash flow management
“You have to spend money to make money” – a realistic assumption to a point. But you have to also be realistic about how much money you can expect to pull in, especially if you’re a new business relying on forecasts. There’s a fine line between spending where you need to and going overboard, and by keeping an eye on your cash flow and managing your spending sensibly you can ensure that you’re not thrown off-balance financially.

Client loss

Once you have a few major clients on your books, your income stream can feel pretty steady. But there can be few guarantees. If you’re getting 80% of your business from 20% of your customers, and you lose a bulk of that 20%, that comfortable revenue you were used to is going to take a painful hit. By building relationships with smaller clients you can give your business a buffer, or expand your target so you’re not putting all your efforts into one niche which could disappear as quickly as it emerged.

 Legal problems
The rejection of a customer, employee or supplier is not to be underestimated, as this is all it takes to land your business in court. With the threat of legal action lurking in every corner, it’s something your business can run into at any point – a costly collision which could force an untimely closure.

You can’t predict these problems, but you can be aware and take proactive measures. This could mean placating an unhappy customer, and always having sufficient liability insurance and legal cover in place as part of your business insurance.

If you want to find out more about how to protect against financial risks, and how your business insurance can support you throughout, speak to the team at Lockyers who can advise you further and take you through your cover options.