UK SMEs highlight cash flow issues amid growth reports

A new report firm Western Union Business Solutions suggests that 70% of SMEs are predicting growth in the coming year.


This follows on from 23% that said they had grown by more than 10% in the last 12 months, but issues remain according to the firm’s International Trade Monitor.


The quarterly survey revealed that increasing operating costs were reported by 56% of companies, yet 55% of companies said they have no plans to increase prices.


As a result, this could pile further pressure on to the cash flows of these companies and result in them potentially seeking corporate insolvency advice.


One in three SMEs said they would increase costs to cover the additional operating costs, while 64% said they were planning greater investment, regardless of the costs involved.


Assessing the cost of ‘doing business’


Meanwhile, 4% of companies said they were going to lower costs for customers despite the risks associated with such a move.


In terms of major cash flow threats, 44% of companies said late payments posed the biggest problems, showcased by a recent Bacs study showing SMEs are owed £39.4bn in late payments.


Despite this, confidence in the economic recovery is high, with 86% of those questioned in the survey in a positive mood.


“We cannot ignore that the cost of doing business is rising,” explained Christina Hamilton, UK Managing Director of Western Union Business Solutions.


“The reluctance of SMEs to raise their prices and pass on their increased costs to customers shows they still believe the recovery is fragile and are more concerned with being competitive than protecting their profit margins.”


She added that receiving late payments could make all the difference to some smaller firms and said that paying on time helped to secure the financial futures of those businesses.


The survey also revealed that many SMEs are turning to financial options such as bank overdrafts and credit cards, instead of bank finance.  


This showcases the fact that many businesses do not want to take any more risks than are necessary in the current economic climate.


By Phil Smith


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