Cashflow problems undermine four in ten small firms

Four-in-ten (38 per cent) small and medium-sized businesses (SMEs) have suffered cashflow problems over the past two years, according to new research by Amicus Commercial Finance.

The figure rises to two-thirds (65 per cent) among medium-sized firms with between 50 and 250 staff.

According to the study conducted by the specialist lender of flexible working capital to SME samong 500 small businesses owners, over the past two years one-in-seven (15 per cent) are still suffering liquidity problems and 12 per cent either came close to or became insolvent. Small businesses recognise the threat cashflow problems can pose; nearly three-quarters (71 per cent) say it is the biggest risk they face.

On a sector basis, 35 per cent of finance and accounting firms report that are affected by cashflow problems. Regionally, companies in the North East have been the worst hit by cashflow shortages.

The biggest challenge caused by cashflow shortages is paying suppliers, cited by 41 per cent of business owners. This is followed by meeting debt repayments (30 per cent), buying inventory (29 per cent) and paying staff (24 per cent). One-in-five (18 per cent) said they had lost contracts due to cashflow problems.

Amicus Commercial Finance provides a revolving working capital facility based on a proprietary invoice discounting platform which utilises the latest available technology and data extraction methodology. The firm’s proposition has proved to be very attractive to a broad range of businesses with a turnover between £1m and £20m.

Its ‘Intelligent Cashflow’ solution is user friendly, making it straightforward for firms to access working capital. It integrates seamlessly with a business’s accounting system, reconciling sales in real time. The company can quickly update each customer’s availability of funds and provide quick and easy access to additional cashflow.

John Wilde, Managing Director of Amicus Commercial Finance, said: “Our research shows that most small firms recognise the damage caused by cashflow problems but that doesn’t guarantee their immunity. The worst case scenario is insolvency but in our experience, slow paying invoices are often to blame. As working capital and cashflow are by their very nature dynamic, most traditional systems have failed to keep pace over the last few years.

“We have taken a fresh, tech-driven approach that builds on some of the lessons learned in the fast growing alternative finance sector. Here at Amicus Commercial Finance, we combine deep sector experience with a high-touch personal service and cutting edge technology to make the process as straightforward and efficient as possible.”

What challenges did your business experience as a result of cashflow problems over the last two years?

Paying suppliers

41%

Meeting debt repayments

30%

Buying inventory

29%

Paying staff

24%

Accessing new finance

21%

Loss of contracts

18%