Rising costs do not sink most small businesses on their own. Running out of cash does. A business can be profitable on paper and still struggle if customers pay late, payroll lands before invoices clear, or tax bills arrive without enough money set aside.
In 2026, that timing gap matters more. The National Living Wage is £12.71 an hour for workers aged 21 and over from 1 April 2026. Employer National Insurance is 15% above the secondary threshold of £5,000 a year, although eligible employers can reduce their annual bill by up to £10,500 through Employment Allowance. Statutory Sick Pay is now £123.25 a week, or 80% of average weekly earnings if lower, and is payable from the first day of sickness for eligible employees.
The answer is not one dramatic cut. It is steady cash management: forecast ahead, get paid faster, time outgoings properly and keep a buffer.
Profit is an opinion, cash is a fact
Your profit and loss account can look healthy while your bank balance tells a different story. Profit records income when it is earned. Cash only appears when the money reaches your account.
In between sit suppliers, wages income when it is earned. Cash only appears when the money reaches, rent, VAT, PAYE, loan payments and other fixed costs. That is where businesses get caught. Good management accounts close the gap by showing what is really coming in and going out, not just what has been invoiced. If you trade through a company, our limited company accountants can help set this up properly.
Know your costs, because they have moved
You cannot manage cash flow you have not measured. A 50p rise in the hourly National Living Wage from £12.21 to £12.71 adds about £975 a year in gross pay for a full-time worker on 37.5 hours a week, before employer NI, pension contributions and other on-costs.
Need Help With Your Accounts Or Tax?
Whether you need support with self assessment, VAT returns, payroll, bookkeeping, CIS, company accounts or corporation tax, Asmat & Co Accountants can provide clear, practical advice for your business or personal finances.
Payroll is often the best place to start because the cost is regular and visible. Review hourly rates, overtime, pension contributions, employer NI and sick pay together. Our payroll services can help you model the monthly impact before it becomes a surprise.
The 4 levers that actually move cash
| Lever | Practical step | Effect on cash |
|---|---|---|
| Get paid faster | Invoice on completion, shorten terms, chase early | Money arrives sooner |
| Slow outflows sensibly | Use agreed supplier terms and avoid paying early by habit | Cash stays available longer |
| Build a buffer | Hold 1 to 3 months of fixed costs in reserve | Protects against a weak month |
| See it coming | Keep a rolling 13-week forecast | Fewer surprises and better decisions |
Getting paid faster is often the quickest win. If customers currently pay after 45 days and you reduce that to 21 days, you have brought in almost 3 extra weeks of sales cash without borrowing or raising prices.
On the outflow side, timing matters. Tax is not due the instant you earn the money, so knowing your tax payment deadlines helps you keep cash available until it is genuinely needed. If VAT is one of your biggest payments, ask whether the VAT Cash Accounting Scheme is suitable. You may be able to account for VAT when customers pay you, not when you invoice them, if your estimated VAT taxable turnover is £1.35 million or less and you meet the conditions. Our VAT return accountant can check this for you.
Build the buffer before you need it
A reserve of 1 to 3 months of fixed costs can turn a difficult month into a manageable one. Build it when trading is steady, not when cash is already under pressure.
For director-shareholders, profit extraction needs care. Our salary versus dividends guide explains how to take money out without stripping the company of working capital. Sole traders need the same discipline, even without the company structure, and our sole trader accounting service helps separate tax money from spending money. Contractors with uneven income often need a larger cushion, which our contractor accountants can help plan.
Get ahead of the next cost rise
Cost pressure is not going away, so the businesses that cope best are the ones that see it early. Whether you are setting up a limited company or have traded for years, a rolling forecast and clear monthly numbers beat reacting from crisis to crisis.
Whether you work with our accountants in Slough or our accountants in Reading, we can build a straightforward cash flow forecast, model 2026 cost increases against your real figures and help you keep more of what you earn in the ban. Book a call and let us get your cash flow on the front foot.
Need Help With Your Accounts Or Tax?
Whether you need support with self assessment, VAT returns, payroll, bookkeeping, CIS, company accounts or corporation tax, Asmat & Co Accountants can provide clear, practical advice for your business or personal finances.
