Four in ten (38 per cent) small and medium-sized businesses have suffered cash flow 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 among 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 cash flow 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 cash flow problems. Regionally, companies in the North East have been the worst hit by cash flow shortages.
The biggest challenge caused by cash flow 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 cash flow problems.
John Wilde, managing director of Amicus Commercial Finance, comments, ‘Our research shows that most small firms recognise the damage caused by cash flow 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.’