By Daniel Hunter
Cash flow remains a significant challenge to large numbers of UK businesses, according to new research from Santander Corporate & Commercial. 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.
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.
“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," Marcelino Castrillo, Head of SME at Santander Corporate & Commercial, said.
“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.”
The research found just 4% of businesses that have used either invoice or supply chain finance to manage their cash flow said that it did not help their business, whilst 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.
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%) saying they were ‘very’ concerned compared to the South West, where firms were the least concerned (8%).
Greater London tops the regions for suffering from late or failed payments from customers (41%) as well as for unexpected costs and charges (21%). Unsurprisingly a third of businesses in Greater London (34%) — the equivalent of almost 100,000 businesses — say they are worried about cash flow over the next 12 months.
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