Tax & admin · 4 January 2018

Guaranteed payment date tops cash flow wish list for small business owners

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Working capital shortage was cited as a greater issue than high overhead costs and customer contracts

The ability to guarantee a date when payment is received by a customer would be the most effective solution to cash flow worries for owners of small UK companies, according to new survey findings.

As concerns over working capital continue to keep two thirds of Britain’s small and micro business owners awake at night – with half a working day each week dedicated to cash flow activities – tackling the nation’s late payment culture has emerged as the central priority.

Barclaycard surveyed over 1,000 decision makers at small UK firms to find that greater control over invoices was the most popular solution to working capital woes.

A quarter of respondents said a guaranteed payment date from a client would have a bigger impact than protecting accounts receivable regardless of external factors, such as a customer going out of business (16 per cent), or having broader options for paying suppliers (14 per cent).

Meanwhile, a fifth of small business owners cited low cash flow as a major obstacle to growth – second only to economic and political uncertainty. A shortage of working capital ranked as a bigger concern than both high overhead costs and worries around customer contracts.

Commenting on the research, Marc Pettican, managing director of Barclaycard Commercial Payments, said the findings confirmed working capital as a “top priority” for small business owners, “with almost two-thirds saying cash flow keeps them awake at night and a third indicating it has impaired their ability to grow”.

“This situation is wholly preventable with the right support, and we encourage small businesses to explore how they can reduce the time and energy they spend on managing working capital problems.

“Whether they are looking for a solution to help them seize a new sales opportunity or invest in new business technology, there are a variety of SME-friendly solutions out there, from a corporate credit card to a business loan. These will help small businesses gain greater control of their cash and reap the benefits that flow from it.”

War on late payments

Tightening the UK’s supply chain practices could be a prominent battle in 2018, with the government’s late payment tsar now inviting small business owners to submit invoicing complaints and the Federation of Small Businesses (FSB) also setting the tone for the year ahead.

In a New Year’s message to UK policy makers, Mike Cherry, FSB chairman, called for real progress on late payments and for the small business commissioner to exercise his authority.

‘The coming weeks and months will be a crucial time for the small business commissioner and his team to start making a real difference to firms impacted by the debilitating late and poor payments crisis across the UK,” Cherry said.

“An estimated £18bn is held up in poor and late payments. This needs to change. Just like everyone else, small businesses deserve to be paid promptly and should not face supply chain bullying. We want to see the worst offenders tackled and then named and shamed if they do not improve.”

As the government sets its focus onto late invoice payments, Business Advice has previously revealed that excessive payment terms could be the underlying problem within Britain’s supply chains

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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