Small and medium-sized enterprises are being urged to take independent advice as a means to solving their cash flow worries and problems. One such solution is to use a specialist business finance company.
According to research undertaken by MarketInvoice, most small and medium-sized enterprises (SMEs) are taking, what can only be described, as an ad hoc approach to managing their cash flow.
MarketInvoice, a business finance company with head offices in Hackney, says more than two-thirds of SMEs are not taking advice on how best to organise their cash flow structure, despite the majority of business owners admitting they monitor the situation on a daily basis.
For a company to run smoothly, it requires an adequate amount of readily available money in order to carry out its business obligations from hour to hour.
Put less simply, it means your current assets need to be greater than your current liabilities. Cash flow is also sometimes referred to as operating liquidity, working capital and current ratio.
And the recently published results of this survey revealed some interesting yet worrying trends:
- Over half (52%) of business owners said they relied on using ad-hoc paper notes, spreadsheets or text messages from their bank, to understand their cash flow position.
- Meanwhile, 18% reported using online accounting software to check on their current status.
- In all, 70% are taking it upon themselves to manage this vital component of business.
- And only 30% were using an accountant to administer cash flow information.
- Just under a half (45%) of business owners check their cash flow position on a daily, or weekly basis, to ensure they have the means to operate fluently.
Having a strong cash flow position is so important, as it determines what money a business has at its disposal to function from morning to morning.
It is not being overly dramatic to explain that a company’s cash flow status has the potential to make or break a business.
Anil Stocker, CEO at MarketInvoice, explained: “Every business needs to know their cash flow position.
“But a disproportionate manual concentration on this problem, often distracts entrepreneurs from focussing on their business, and this affects growth.
“Managing cash flow needn’t be such a taxing affair with the plethora of online tools available today.”
And there are serious consequences if a company cannot find an effective solution to its cash flow issues, which are becoming a bigger and bigger worry as profit margins are being squeezed in so many areas of commerce.
The survey has unearthed a number of other contemporary concerns:
- Cash flow constraints mean that 87% of businesses are prevented from taking on more orders.
- Of those who seek outside assistance, some 14% are turning to their business bank manager for guidance.
- And in a bid to improve cash flow, almost half (48%) of business owners say they have solved problems by simply increasing their bank overdraft facilities.
- One in six (16%) report they are using invoice finance to tackle cash flow constraints.
Stocker added: “It’s imperative that business owners get advice to manage cash flow. We can’t allow UK economic growth to be stunted because of cash flow constraints.
“Businesses waiting on long payment terms can use invoice finance to help bridge the gap by getting an advance on their invoices and propel their businesses forward.”
The survey was conducted by LM Research & Marketing Consultancy (an approved partner of the Marketing Research Society and ESOMAR corporate member).
LM Research collected information and data from 1,000 limited companies in the UK, which employ between one and 249 members of staff.