How business banking helps manage working capital: smart moves for SMEs

Working capital keeps a business running day to day. When it’s tight, everything feels harder, from paying suppliers to covering payroll. That’s where business banking comes in. With the right support and tools, managing working capital becomes less reactive and more strategic.

If you're comparing business accounts, the Allica Business Current Account is built to support SMEs with dedicated service and tools to help manage cashflow. If not, no problem, let’s get into how banking can make a difference.

What is working capital and why does it matter?

Working capital is the money a business uses to keep things ticking over. It’s what’s left when you take your current liabilities away from your current assets.

If you’ve got enough, you can pay suppliers, handle bills, and keep operations moving. If not, you start feeling the pressure. That might include:

• Missed supplier payments
• Delayed orders or paused operations
• More time spent chasing unpaid invoices

It affects everything from cash flow to growth plans. Managing it well means tracking what’s coming in, what’s going out, and making sure there’s always enough to meet short term obligations without falling behind.

How business banking supports working capital management

A business bank account should give more than just a balance. It helps track inflows and outflows so you can stay on top of your working capital day to day.

Tools like direct debits and standing orders keep payments on a routine, which helps manage short term obligations. Faster payments also reduce delays, making it easier to pay suppliers on time and keep your working capital cycle steady.

With the right setup, you get a clearer view of your cash flow and more control over how working capital moves through the business.

This kind of visibility and automation is even more powerful when your bank integrates directly with your tools something we cover in more detail in Business bank accounts with account integration: how to streamline your finances with software syncing.

Accounts and tools designed to improve cashflow

Digital business accounts make it easier to see what’s happening with your money in real time. That’s helpful when cashflow’s tight and you need to know what’s landed and what’s going out.

When those accounts link with accounting software, you get a better view of your balances and expenses without pulling spreadsheets every week. It saves time and keeps things accurate.

Some helpful tools include:

• Scheduled payments to spread out costs
• Alerts before balances dip too low
• Payment limits that prevent overspending

Small features like these go a long way in helping businesses avoid shortfalls and manage costs more smoothly.

Working capital strategies for SMEs using banking services

Working capital management is rarely a one-off job. It changes alongside your business. If you're planning to expand, reviewing your net working capital helps make sure you’ve got enough short term assets to cover those upfront costs.

Seasonal dips in income can throw off the working capital cycle too. Many businesses build a cash buffer by setting aside monthly deposits in a savings account or tax pot. That way, they can meet short term obligations like supplier payments even when sales are slower.

It’s also worth automating key outgoings, like corporation tax or standing orders, so there’s less chance of missing a payment. Aligning billing cycles with payment approval limits can help smooth out cash flow and avoid unexpected costs.

This is also where interest-earning accounts can help, especially when optimised for short term balances. Learn more in our breakdown of AER interest on business bank accounts: what it means and why it matters.

Common risks and how banks can help reduce them

Late payments are one of the biggest drains on working capital. When receivables slow down, cash flow tightens fast. Real-time tracking through your bank account helps spot the delays early, and automated reminders can keep things moving.

Too much stock sitting on shelves ties up cash you might need elsewhere. Having visibility on your outgoings helps you plan purchases better so you’re not over-ordering or guessing at what’s needed.

You can also reduce risk by:

• Diversifying revenue streams, not relying on one client
• Matching your cash conversion cycle to operating costs
• Using real-time alerts to flag suspicious activity

With the right banking partner, many of these risks become easier to monitor and manage.

When to speak to a relationship manager about working capital

Working capital can shift quickly. Planning for growth or expansion is one of those moments where your working capital position really needs a second look. You might have enough current assets on paper, but when you subtract current liabilities, it can tell a different story.

Seasonal income cycles also affect your cash conversion cycle. If too much cash is tied up in inventory or accounts receivable, you risk falling behind on short term obligations. That’s when forecasting cash flow and reviewing the working capital ratio becomes important.

Major payments like corporation tax or renegotiating supplier terms can also stretch working capital. Even positive working capital can feel tight if timing is off or your operating cycle is longer than expected.

That’s where a relationship manager steps in. Business banking relationship manager: why personalised support still matters for SMEs explains why personalised support remains so important.

How to calculate your working capital and what it tells you

Working capital is simple to calculate. You take your current assets things like cash, accounts receivable, and inventory and subtract your current liabilities. What you’re left with is your net working capital.

It’s a quick way to check if your business can meet its short term obligations. A positive figure means there’s enough cash or liquid assets to cover costs. Negative working capital might mean bills are coming in faster than money’s going out, which puts pressure on cash flow.

Looking at this number regularly helps track your company’s financial health. Combine it with other figures like the working capital ratio or quick ratio to get a fuller view of where you stand. Even small shifts can point to bigger trends in how you manage resources, stock, or credit terms.

Final thoughts

Managing working capital well can make or break a business. The right banking tools and support allow SMEs to take control of their cashflow, reduce risk and plan ahead.

With better visibility and tailored features, business banking turns working capital from a constant worry into something you manage with confidence.

If you’re also comparing costs, our guide to the Best free business bank accounts outlines accounts with no monthly fees that still deliver real value.

Business banking that works
like you do

Allica’s Business Rewards Account is built for established SMEs that want smart banking and strong financial control. You get a dedicated relationship manager, real-time cashflow tools and accounts designed to support the way your business operates.

There are no monthly fees and up to 1.5% cashback* on eligible card spend, instant alerts, and expert support when you need it.

It’s business banking that gives you the structure, confidence and insight to manage your working capital and your growth.

Open your Business Current Account today.

* Cashback is variable based on eligibility and spend. See a full list of limits and fees here.

Links were live and information was correct at the time of writing the article.

Disclaimer: This is information – not financial advice or recommendation

The content and materials featured in this article are for your information and education only, and are not intended to take into consideration any particular recipients’ financial situation. The product details and interest rates referred to are correct at the time of writing.

The information does not constitute financial advice or recommendation and should not be considered as such. Allica Bank will not accept any liability for any loss, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.