Cash flow concerns keep UK SMEs grounded
The news this month that the majority of UK SMEs are predicting growth will have been music to the ears of small business owners everywhere.
The positive forecast from the Western Union Business Solutions International Trade Monitor was a real boost to SMEs everywhere. However, one caveat from the report was worth looking at in a bit more detail than most.
There is little doubt that cash flow is still a key concern for SMEs across the nation, as 44% of the SMEs questioned in the report cited late payments as a key hurdle that they still regularly contend with.
How can you keep cash flow ticking over?
In its simplest terms, cash flow represents the way that funds enter your business, move around it and ultimately filter out through the other side. It is a simple measurement of how free capital is to enter, circulate and leave a company.
Failure to assess this area could ultimately have significant consequences for an SME of any size.
Cash flow is important to a business because it is an indicator of whether a company is stable or secure, but also whether it has the potential for expansion. A healthy handle on your cashflow demonstrates to investors and creditors that the business is suitable for continued trading and remains a positive investment. In a volatile economic climate, this is an invaluable asset for the business.
It is also worth noting that a poor hold over the cashflow of a business is one of the most frequently used reasons why a company has ultimately failed. Major business restructuring may be required if you fail to address this point.
If you are not fully aware of the day-to-day cashflow situation then how do you expect to attract new customers to the business or convince directors that further investment is a good idea?
Placing a strong focus on the importance of cashflow management from the outset is the first step to cultivating a successful business and ultimately watching it grow!
By Phil Smith