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Cash flow presents problems for businesses

Cash flow presents problems for businesses

Category: Business

Updated: 28/08/2009
First Published: 28/08/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Management of cash flow represents one of the biggest challenges to businesses in the current climate, with late payment the biggest problem for more than half of small and medium sized enterprises (SMEs).

A total of 54 per cent of SMEs said that securing payment from customers within the agreed terms is the biggest challenge they face.

Late payment is rife, according to a survey carried out by Hilton-Baird Financial Solutions, with more than a quarter (27 per cent) of respondents waiting more than two months to receive monies owed.

"It would appear that owner-managers are spending more of their time and resources chasing late payments, which can have a damaging impact on the business, as well as delaying the payment of suppliers," said Evette Orams, managing director of Hilton-Baird Financial Solutions.

Other common problems amongst SME owners included settling supplier payments on time (14 per cent), paying VAT/PAYE (13 per cent) and planning capital expenditure (12 per cent).

Restrictions on lending criteria by the UK's financial institutions is leaving its mark on businesses, with almost a third (32 per cent) claiming their funding had been either refused or reduced over the last six months.

The survey found a rise in the number of owner-managers seeking external funding to cope with the downturn. Thirty five per cent said they had turned to traditional lenders for an overdraft, while 21 per cent have sought out of business loans.

A quarter said they were considering alternative forms of finance, such as invoice finance for a vital cash injection.

"Unsurprisingly, there is a correlation between companies waiting longer to be paid and those seeking invoice finance, with 27 per cent having to wait more than two months for payment," added Orams.

However, there is a feeling of increasing optimism, with the vast majority (86 per cent) expecting an economic recovery in the next two years.

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