As inflationary pressures persist and the cost of capital continues to fluctuate, business leaders are facing growing challenges in managing cash flow and funding planned investments. According to the 2025 Aon Global Risk Management Survey‡, cash flow entered the top 10 business risks for the first time since 2019, and this is attributed to the same macro issues we’ve seen over the last year, such as inflation and interest rate uncertainty.

In this quickly evolving environment, many business leaders are reevaluating their capital strategies and priorities. While adapting to this environment is essential, companies can still drive growth while maintaining flexibility through intentional planning.

Knowing there will always be changing conditions to manage through, business owners can employ several strategies to help them use capital effectively, starting with getting a handle on cash flow.

Addressing cash flow challenges

Cash flow is critical to the daily operations of any organization. Even profitable businesses can struggle if cash flow is not managed properly. Here are some of the most common cash flow challenges businesses see and how to address them to better manage cash flow:

  • Expenses that require payment before revenue comes in. In these instances, there is an opportunity to negotiate supplier payment terms to better manage cash outflows with different payment plans or changing payment deadlines. Having a cash reserve buffer can also help businesses weather unexpected or higher expenses that occur before monthly revenue is available.
  • Seasonal or fluctuating revenue. When revenue is inconsistent throughout the year, it is critical to forecast cash flow monthly, in addition to quarterly and annually, so you can build a clear, real-time picture of available funds. This also may include increasing savings levels during higher revenue periods so you can create a cushion for leaner months.
  • Managing unexpected expenses: Unexpected expenses can disrupt even the most carefully planned budgets, which can create cash flow challenges. Establishing a contingency fund is essential to absorb sudden financial shocks, such as unplanned equipment repairs or urgent inventory needs. Having a strong relationship with your bank and your suppliers can provide flexibility, or even emergency credit, when unexpected expenses occur.

How to create a capital plan that works

Intentional planning that reflects the current environment and market dynamics is key to better managing and maximizing capital. Here are some things to consider to help improve your capital planning:

  • Leverage technology. With a plethora of available tools, there are many ways businesses can leverage technology to gain additional efficiencies, including freeing up capital.
    Investing in digital tools—such as upgraded accounting and credit management software—enables real-time cash flow monitoring, reduces manual errors, and streamlines billing, payments, and reconciliation.
  • Find ways to automate. There are many ways companies can automate that have a direct impact on operations. Automating with an integrated payables solution can create a streamlined process for paying vendors while also accommodating multiple payment types—a simple way to automate and see quick results. Automating day-to-day functions improves cash flow by providing more control over payment timing and increased visibility in reconciliation. In addition to payables functions, automation also enhances fraud detection by moving from paper to electronic payables, making payments easier to track and more difficult to imitate.
  • Limit prepayment (or payoff) on low-cost term debt to conserve cash. If you have the benefit of low-interest rate debt, don’t burn through your cash by paying it down quickly. Instead, stay steady on your required payments and make sure you have plans for reduced income or profit if the markets get bumpy.

In addition to these strategies, owners can also amplify capital by regularly performing financial plan checks and realigning budgets throughout the year to ensure forecasting remains accurate as major market changes occur. Some areas to consider include:

  • Perform a competitive assessment to identify opportunities, gaps, etc. Where do opportunities in the marketplace exist and where should you invest your dollars?
  • Check forecasts and financial models as conditions change. Have swings in the market or specific sectors changed your outlook? Does your business need to pivot to weather those changes or potential shortfalls?
  • Tighten up cash flow processes for receivables and payables. Does it make sense to use a business credit card or leverage additional treasury management services to keep more money in your pocket for business expenses?

Investing in your business

Finally, it’s important to assess when and how to invest in your business. While it can be daunting to reinvest profits in your operations during challenging or uncertain economic times, if possible, it can have a significant impact on short- and long-term success. A few areas to consider include:

  • Are there new or ongoing opportunities or issues that require immediate funding or resources?
  • What is the risk or reward of investing or not investing in these projects now?
  • Can the business maintain or progress in either or both scenarios?
  • Would investing now be a strategic advantage in your industry?

Trusted advice should be a foundation

Regularly assessing your business and asking tough questions is part of effective planning. While we can’t control the current—or future— conditions, businesses that make a plan, check it and are willing to adjust are the ones with the best chance of success during economic ups and downs. Bringing in your banker regularly to discuss your goals, questions and concerns is key to staying ahead of any economic environment.

This article is educational only. Please consult your financial and tax professionals. If you are interested in learning more about how UMB can help your business, visit our website.

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