By Lea Pachta

Harold Macmillan once said that Britain has ‘never had it so good’. However, in the recent economic downturn experienced in the last couple of years, the very opposite has often been the case for a growing number of small and medium enterprises (SMEs) in the UK.

Despite the last quarter providing small economic growth in the UK, businesses across the country have struggled to operate effectively within their means.

Statistics estimate that there are around 350,000 retailers and over half a million online retailers in the UK. The recession has hit small and medium enterprises the hardest of all. Despite monetary capital being an all too precious commodity during the recession, banks have been reluctant to lend at levels previous to the economic recession.

This lack of lending has proved a particular problem for smaller enterprises, who often struggle in terms of cash flow. With many businesses operating in overdrafts and with additional credit cards and loans, interest rate rises have also taken their toll, with many small enterprises struggling to survive.

In April 2010 the Bank of England Credit Survey[1] found that credit made available to small business in the first quarter of the year was little changed from the previous quarter, despite an improved economic outlook. The statistic is compounded when considering that the Bank of England found that the availability of credit has improved for larger companies.

However, despite this grim outlook, recent research from Barclays has pointed to many small businesses taking active steps to reduce the pressure on cash flow with extensive debt write-offs. Indeed, around 720,000 SMEs, wrote off an average of £2,529 last year, more than double the 2008 figure of £1,133, according to the Barclays analysis[2].

Whilst this is a positive step for SMEs to take, there are other, more innovative ways of easing the pressure on cash flow, especially when considering the retail sector.

In the current climate, the problems faced by many small and medium enterprises - particularly in the retail sector - are compounded by excess stock that is left unsold. Much of this stock takes up valuable working capital and as such can act as a millstone around many businesses necks.

In addition, companies that are downsizing or making redundancies as a result of the recession may find themselves lumbered with unwanted stock, which could be sold and release valuable operating funds. This stock could come in the form of unused computers in an office, through to company mobile phones or excesses in printer supplies.

The problem that SMEs may face in moving their unwanted stock on has been compounded by a lack of a suitable outlet to turn this product into capital. Online trading sites such as eBay have gone someway to demonstrate the potential of the secondary goods market. However, such a facility has proved a difficult area for traders to plunder, owing to the often large quantities of stock they might have to sell.

As such, a b2b marketplace that would provide companies an outlet for companies to sell any excess stock they might have in larger quantities, could be a timely addition to the secondary goods market and indeed the larger business industry.

With many small enterprises operating under the mantra of being ‘asset rich, cash poor’, such a site can provide an easy and effective way of selling excess stock and freeing up cash flow to invest elsewhere.

In addition, by offering a growing database of buyers for companies to tap into all in one place, the process of selling excess stock through such outlets has become increasingly efficient and as such is a cost effective way for businesses to operate.

Indeed, in an effort to compound the problem of overstock, — the first b2b marketplace of its kind - has noticed a trend in 2010, of a growing number of small and medium enterprises seeing the potential of moving on excess stock. The number of businesses registered to sell their stock on the b2b marketplace has increased significantly since the start of the year — a trend expects to continue as its database of buyers and sellers expands meaning it is easier to sell excess stock.

Whilst the UK experienced small growth in the last quarter, the threat of recession still looms large over the country’s economy. The green shoots of recovery may be beginning to come through in time for summer. However, the need for businesses to operate more effectively and efficiently is unlikely to dissipate.

Regardless of whether the country enters a recession once more, freeing up cash flow through innovative means such as selling excess stock makes good business sense. Indeed such practices could, for many small businesses, potentially make the difference between survival and bankruptcy.

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