Almost 40% of businesses in the UK and Ireland, surveyed in the most recent Close Brothers Business Barometer, believed they had missed a commercial opportunity in the last 12 months, due to a lack of available finance.
Supply chain issues, recruitment difficulties and the ongoing impact of Brexit and the coronavirus pandemic have increased costs and placed a further strain on cash flow for many organisations.
When asked about current concerns, almost half of all senior decision makers stated energy costs were most worrying. Inflation, interest rates, tax and cash flow were also highlighted as particular pain points. This limits the ability to meet financial obligations and hinders progress, pulling focus and energy from other growth focused opportunities.
How to address cash flow problems
In challenging times as these, businesses need to ensure they are following good practices when it comes to improving cash flow.
Financial forecasts for the next 6 to 12 months will show potential periods of risk and help to predict when invoice collection is most difficult, allowing for mechanisms and plans be put in place to manage more difficult times.
These include having robust systems for promptly sending invoices and chasing clients who fall behind with their payments. For some, keeping a log of customers who continually pay late can be helpful. In certain circumstances penalising late payments, or discounts for early settlement may be an option.
Finance options for cash flow
Access to appropriate finance solutions can also mitigate impacts of late payments and allow added peace of mind. Invoice finance can solve a company’s cash flow problems by providing up to 90% of the value of your outstanding invoices as soon as they are raised, and then, once they are settled, you receive the balance less a pre-agreed fee.
Invoice factoring has the added benefit of collecting payment from your customers on your behalf.
Asset based lending (“ABL”) is an alternative measure to release larger amounts of working capital, against assets such as stock, property, plant and machinery, in addition to unlocking cash tied up in unpaid invoices.
Whatever your needs, having secure cash flow is the best way to keep risks low, maintain consistency and plan for future development.
All figures unless otherwise stated are from a survey conducted January 2024. The survey canvassed the opinion of 900 SME owners and business managers from several industries across the UK and Ireland on a range of issues affecting their businesses.
