How to Avoid a Cash Flow Crisis in a Growing FMCG Brand
Answer snippet (50 words):
Cash flow crises in FMCG brands are rarely about profit — they’re about timing. Fast-moving growth, supplier terms, and retail payment cycles can choke cash just as momentum builds. Fix it with proactive forecasting, smarter dashboards, better stock control, and scenario modelling. Here’s a practical, 8-step financial playbook.
Why Cash Flow Breaks Happen
Growing FMCG businesses are notorious for “running out of cash” — not because they’re failing, but because success arrives faster than cash does.
- Long payment terms from retailers: UK supermarkets and high-street chains often pay on 60–90 day terms. According to the Office for National Statistics (ONS), over 55% of small UK manufacturers report cash flow as a barrier to growth — largely due to these delayed inflows.
- Upfront costs for growth: Marketing, packaging, product development, new staff — the outgoings hit before the returns. In scaling phases, it’s common for operating expenses to increase 40–60% faster than revenue.
- Inventory cash traps: As you grow, you buy bigger batches. But those goods often sit in warehouses or on shelves for weeks. Cash tied in stock is invisible until you model it properly.
- No integrated forecasting: Many founders track P&L but neglect cash. The Financial Reporting Council (FRC) highlights that poor cash management is the leading cause of SME distress, even in profit-making companies.
- VAT and corporation tax shocks: Large VAT outflows (especially from D2C growth or imports) combined with unexpected corporation tax bills can trigger a cash cliff edge.
8-Step Cash Flow Playbook for FMCG Brands
- Build a Rolling 13-Week Cash Forecast
Use accounting software like Xero with Excel or Power BI. Track receipts, outgoings, stock purchases, and marketing spend weekly. Treat it like your bank balance — because it is. - Split Stock Forecasting from Cash Forecasting
Build an SKU-level stock model: sales vs. production, lead times, MOQs. Sync with demand plans. Feed purchasing into your cash forecast. - Demand-Planning Dashboard with Scenarios
Use Power BI or Excel to track sales by channel, forecast vs. actuals, and three demand scenarios (base, stretch, downside). Tie to marketing spend and reorder triggers. - Renegotiate Terms Strategically
Push for 30–60 day supplier terms. Structure phased marketing contracts. Back PO requests with forecast data to build trust and flexibility. - Bake VAT Into Your Forecast — Weekly
Forecast VAT weekly. Track VAT on gross sales and purchases. Build buffers, especially if importing goods. Prevent £30k–£50k quarterly shocks. - Build a Capital Buffer Policy
Define minimum cash runway (e.g. 8 weeks). Use it to trigger hiring, investment, or fundraising decisions. Model runway monthly if post-raise. - Use Purchase Orders Religiously
Create and approve POs for all major spend. Match POs to invoices before payment. This adds rigour and protects against errors and overcommitment. - Review Cash Flow Weekly with Leadership
Run a 30-minute weekly review. Track actuals vs. forecast, upcoming cash needs, stock reorders, and new risks. Cash is everyone's job.
Case Study: Avoiding Collapse at £2m Run Rate
An FMCG snack brand (let’s call them “Green Roots”) was scaling quickly — 140% YoY revenue growth, listings in three major UK retailers, and a £2m annualised run rate.
The cause of their crisis?
- £270k tied up in new stock production
- £190k due from retailers on 60-day terms
- £36k VAT liability not forecasted
- New hires increasing OPEX by £25k/month
Despite being profitable on paper, the business hit a liquidity wall. Their FD rebuilt the cash model from scratch, introduced weekly forecasting, and flagged that without an emergency £100k, payroll would bounce in 3 weeks.
They paused one NPD launch, extended payment terms with a major supplier to 45 days, and secured a 12-month CBILS loan at 6.25%. By Q3, they had rebuilt a 10-week cash buffer and negotiated better trade terms with retailers.