Do you own an SME? Are you worried about cash flow, budgeting and business forecasting?
Well, if you are you are certainly not alone. Any accountants’ experiences clearly demonstrate that smaller businesses are far more likely to have problems with cash flow issues than larger, more established companies. Though common knowledge, there has been little empirical evidence to back up these suspicions. However, Santander Corporate & Commercial has now commissioned a study which demonstrates conclusively that a high proportion of small-medium sized enterprises are worried about their ability to manage cash flow effectively.
According to the study, one in six UK SMEs reported being ‘very’ concerned about managing their cash flow over the next 12 months, whilst another one in four claimed to be ‘quite’ concerned about the problem. By contrast, larger businesses were largely unconcerned, proving the point that the smaller the firm, the greater the concern. They appeared to be far more confident and comfortable at managing their cash flow effectively. Only 6 percent of businesses with turn overs of between £5 – £20 million claimed to be ‘very’ concerned, compared with 14 percent for businesses with turn overs of between £500,000-£1 million, and 22% with turn overs of between £250,000 and £500,000.
According to Marcelino Castrillo, head of SME at Santander Corporate & Commercial:
“Cash flow clearly remains a huge challenge for thousands of UK businesses. However, many businesses are missing out on effective alternative financing solutions such as invoice or supply chain finance – or relying excessively on loans and investments – and in doing so, are opening themselves up to unnecessary cash flow volatility and business risks.”
“‘It can be very beneficial for companies to take a regular review of their resources, both in terms of cash flow and their wider business plans, to ensure they have the best toolkit to equip themselves for managing payments and dealing with the unexpected hurdles that all businesses face from time to time.”
In the study nearly half of the SMEs reported having at least one cash flow issue within the 12 months prior to the report: 24% suffered from late or failed payments from customers, 8% suffered due to poor sales and 7% incurred unexpected costs and high charges. In terms of regional variation, the South West appeared to be the region with the fewest worries about cash flow issues: only 8% were ‘very’ concerned about the problem. However, the North West and West Midlands fared much worse, with 36% claiming to be very worried. Even in the capital 34%of businesses claimed to be very worried about cash flow issues over the next 12 months.
As an accountancy firm in the North West of England, Steven Glicher has seen clear evidence of the problem on our own doorstep.
We have seen how cash flow concerns can damage and undermine SMEs. However, it needn’t be like that. Steven Glicher offers independent and relevant small business tax advice to help SMEs overcome such problems. If you’re concerned about cash flow management, budgeting and forecasting, then speak to Steven Glicher today on 0161 485 8007.