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More than one-third of small and medium-sized enterprises (SMEs) are having difficulties with cash flow due to late payments, research from BACS Payment Schemes Limited reveals.
According to the research, 43% of SMEs experienced late payments during 2018 and, of these, 78% of had to wait one month or more beyond their agreed terms before they were paid. This resulted in an estimated total of £13bn late payment money being owed to SMEs. Receiving payment beyond the agreed date is likely to affect the cash flow of SMEs as they are more likely to rely on these funds than larger organisations – there are ways to ease cash flow difficulties however.
One way businesses can help protect themselves from cash flow issues is to build up a business savings pot that will help to buffer against late payments. There are a number of savings accounts that are specifically aimed at business, including SMEs, which offer highly competitive rates. When opening a business savings account, business owners should be careful to ensure that they will be able to access their funds when needed, as often the higher saving rates are only available on accounts that require money to be locked into a fixed term period.
Alternatively, business owners can look at taking out a loan or using credit cards as a short-term solution to help their company through cash flow issues. Before taking out a loan or using credit cards, business owners should ensure that they will have the money needed to pay off the debt without the business getting into further difficulty. Business loans and business credit cards are designed specifically for businesses, and will usually offer more favourable rates than those aimed at consumers.
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