By Claire West

According to new research by Lloyds TSB Commercial Finance, the number of SMEs experiencing cashflow problems has increased in the last year. The survey shows that over a third of businesses (35 per cent) are experiencing cashflow difficulties. This is an increase on the same period last year when just over a quarter (28 per cent) of businesses had problems with their cashflow.

The data is taken from the bank’s bi-annual ‘Business in Britain’ survey, which questioned over 1,700 firms across the country in a variety of sectors about issues affecting them*.

Of those small and medium sized enterprises (SMEs) that experience cashflow difficulties, over half (54 per cent) say that late payments are to blame. The number of firms attributing cashflow problems to late payments has fallen slightly from last year, down from 60 per cent. However, late payments are still the single largest cause of cashflow problems, followed by a fall in demand or lack of business (39 per cent).

Lloyds TSB Commercial Finance, which provides businesses with asset based lending and invoice finance, is urging companies to sign up to the Prompt Payment Code* to ease the pressure of late payments on SMEs.

Donald Kerr, managing director of Lloyds TSB Commercial Finance, said: “Over a third of businesses suffer from poor cashflow, and half cite late payments as the main cause. There are several things companies can do to ensure that late payments don’t affect their cashflow. Prevention is better than cure, so carrying out background checks on customers, and setting out clear payment terms at the beginning of the relationship can help avoid any problems before they begin. In addition, widespread adoption of the Prompt Payment Code will mean that companies treat suppliers fairly, and late payments will become less endemic.

“Managing cashflow is one of the key concerns for businesses. For many SMEs, invoice finance can help them borrow against the future value of invoices, meaning they can avoid payment delays and improve their cashflow.”