CASH FLOW CONCERNS: UK SMEs WORRIED FOR THE YEAR AHEAD…
Businesses in the West Midlands are the most concerned about cash flow compared to any other region in the UK
Almost one in five cite late and/ or failed payments from customers as the main reason for cash flow problems
Cash flow remains a significant challenge to large numbers of UK businesses, according to new research from Santander Corporate & Commercial1. Almost one in six (17%) respondents in a UK-wide study said they were ‘very’ concerned about managing cash flow effectively over the next 12 months, with a further 27% saying they were ‘quite’ concerned. Around half (46%) of businesses report being hit by at least one recent cash flow setback – with late/ failed payments from customers (24%), weak sales (8%) and unexpected costs and charges (7%) the top three reasons cited.
Cash flow is especially concerning to businesses based in the West Midlands. Almost two thirds (62%) of respondents reported being ‘fairly’ or ‘very’ concerned about managing cash flow effectively over the next 12 months, the majority (36%) of whom were ‘very’ concerned. Almost one in five (19%) cited late or failed payments from customers as the main reason for their cash flow issues, followed by weak product sales/ customer demand (9%).
The research from Santander Corporate & Commercial found that larger UK businesses (those with annual revenues between £5 million – £20 million) are less concerned about cash flow compared than smaller companies, with 6% saying they are ‘very’ concerned, compared to 14% of firms with annual revenues between £500,000 – £1 million, and 22% in the £250,000 – £500,000 bracket.
However, the research revealed greater use of cash flow management solutions such as Invoice Finance, Asset Finance and Supply Chain Finance by larger businesses: one in four (25%) firms with turnovers between £5 million – £20 million have used Invoice Finance or intend to over the next 12 months, compared to 12% with revenues of £500,000 – £1 million and 2% in the £250,000 – £500,000 tier.
Businesses in the West Midlands were least likely to use alternative finance solutions to help manage cash flow, with only 4% of businesses using invoice financing to support or grow their business. In contrast, the West Midlands had the highest proportion of businesses (25%) relying on personal or family investments to grow or support their business.
Leon Marklew, Regional Director for Santander Corporate & Commercial, said: “Cash flow clearly remains a huge challenge for thousands of UK businesses, especially those in the West Midlands. 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.”
|How concerned are you about successfully managing cash flow over the next 12 months? (Businesses based in the West Midlands and West Midlands region) (1)|
|Not concerned at all||
Overall, the research found just 4% of UK businesses that have used either invoice or supply chain finance to manage their cash flow said that it did not help their business, while businesses in the transport and logistics, manufacturing, production and wholesale industries sectors are most likely to have used and benefitting the most by using invoice or supply chain finance.
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Tags: annual revenues, Business, Business Information Portal, Business News, businesses, customers, Entrepreneur, Government, Leon Marklew, Regional Director for Santander Corporate & Commercial, Santander Corporate & Commercial, setback, SMEs, The BIP, UK businesses, West Midlands, West Midlands BIP