Moorfields investigates as SMEs reveal cash-flow fears for the future
At Moorfields our work in offering turnaround management services to struggling businesses means that we are keenly aware that good cash flow management is one of the most crucial facets of any successful business.
Demonstrating how closely cash flow is tied into business priorities, a new report has revealed that almost 50% of the 451 SMEs surveyed (with turnovers of over £50,000) were concerned about how they would manage their cash flow in the coming year.
Across the regions, those in the North West and West Midlands (36%), were most worried about cash flow management over the next 12 months, followed by Greater London (34%).
Late payments are the most common issue
The main reasons cited for disruption to cashflow were late/failed payments from customers (24%), weak sales (8%) and unexpected costs and charges (7%).
In fact, a quarter of the larger businesses (annual revenues between £5m and £20m) felt they had to turn to invoice financing in order to bridge any gaps in cash flow.
This figure stood at 2% for firms with revenues of between £250,000-500,000. Invoice financing and asset-based lending, allows businesses to borrow funds against their outstanding invoices and in some cases lenders recover these funds directly.
Figures from the Asset Based Finance Association (ABFA) reveal that its members have provided finance to roughly 42,000 businesses while asset-based lending has increased by 4% between 2011 and 2012.
Marcelino Castrillo, head of SME at Santander Corporate & Commercial, which commissioned the study, argued that: "Cash flow clearly remains a huge challenge for thousands of UK businesses".
He went on to add:
“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.”
To ensure that your business has the support it needs to manage its cash flow, you may want to seek professional advice on a business turnaround.