Small businesses still struggling with cash flow management

Cash flow management remains a significant challenge to large numbers of UK businesses, finds research.

Almost one in six small businesses in a UK-wide study say they are ‘very’ concerned about managing cash flow effectively over the next 12 months, with a further 27 per cent saying they are ‘quite’ concerned, according to a study by Santander Corporate & Commercial.

Around half (46 per cent) of businesses report being hit by at least one recent cash flow setback – with late/failed payments from customers (24 per cent), weak sales (8 per cent) and unexpected costs and charges (7 per cent) the top three reasons cited.

Larger UK businesses (those with annual revenues between £5 million – £20 million) are less concerned about cash flow compared than smaller companies, with 6 per cent saying they are ‘very’ concerned, compared to 14 per cent of firms with annual revenues between £500,000 – £1 million, and 22 per cent in the £250,000 – £500,000 bracket.

Marcelino Castrillo, head of SME at Santander Corporate & Commercial, says, ‘Cash flow clearly remains a huge challenge for thousands of UK businesses. However, many businesses are missing out on effective alternative financing solutions such as invoice or supply chain finance – or relying excessively on loans and investments – and in doing so, are opening themselves up to unnecessary cash flow volatility and business risks.

‘It can be very beneficial for companies to take a regular review of their resources, both in terms of cash flow and their wider business plans, to ensure they have the best toolkit to equip themselves for managing payments and dealing with the unexpected hurdles that all businesses face from time to time.’

On a regional basis, firms in the North West and West Midlands are the most concerned about cash flow, with more than a third (36 per cent) saying they are ‘very’ concerned compared to the South West, where firms were the least concerned (8 per cent).

Greater London tops the regions for suffering from late or failed payments from customers (41 per cent) as well as for unexpected costs and charges (21 per cent).

A third of businesses in Greater London (34 per cent) – the equivalent of almost 100,000 businesses – say they are worried about cash flow over the next 12 months.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

Related Topics

Managing Cashflow