Tax & admin · 7 December 2016

Cash flow issues cripple seven in ten small companies

Cash flow
Over four in ten small business owners claimed that poor cash flow made it difficult to pay suppliers on time
Over 70 per cent of small business owners agree that poor cash flow poses the biggest risk to their company, as a new study reveals its impact on the survival of smaller firms.

The study, conducted by small business lender Amicus Commericial Finance, found that cash flow problems have affected four in ten small businesses over the last two years, with firms operating in the North East of England the most affected by a lack of sufficient funds running through a company.

In response to the research, John Wilde, managing director at Amicus Commercial Finance, acknowledged that most small firms recognise the damage caused by cash flow problems but that doesnt guarantee their immunity.

The primary challenge of poor cash flow cited by 41 per cent of survey respondents was being able to pay suppliers on time. The paradox here is that late payments from further up the supply chain, down to small companies, remain one of the main causes of cash flow problems.

Research from the Asset Based Finance Association (ABFA) has suggested that clients of small companies take an average 72 days to pay an invoice, with micro business owners waiting six weeks longer to be paid than larger firms.

Further to this, a recent study by the Federation of Small Businesses (FSB) found that effective action into the country’s late payment culture would have saved 50, 000 small firms from folding in 2014 a 2.5bn loss to the UK economy.

Business Advice recently revealed the best and worst retailers for paying small suppliers on time. Supermarket giant Tesco was found to be the guiltiest culprit, taking an average 105 days beyond its specified terms to pay an invoice.


 
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ABOUT THE EXPERT

Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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