Four-in-ten (38%) small and medium-sized enterprises (SMEs) have suffered cash flow problems over the past two years, according to new research by Amicus Commercial Finance.
The figure rises to two-thirds (65%) among medium-sized firms with between 50 and 250 staff.
According to the study conducted among 500 small businesses owners, over the past two years one-in-seven (15%) are still suffering liquidity problems and 12% either came close to or became insolvent.
Small businesses recognise the threat cash flow problems can pose, as nearly three-quarters (71%) say it is the biggest risk they face.
On a sector basis, 35% of finance and accounting firms report that are affected by cashflow problems. Regionally, companies in the North East have been the worst hit by cashflow shortages.
The biggest challenge caused by cashflow shortages is paying suppliers, cited by 41% of business owners. This is followed by meeting debt repayments (30%), buying inventory (29%) and paying staff (24%). One-in-five (18%) said they had lost contracts due to cash flow problems.
John Wilde, managing director of Amicus Commercial Finance, said: “Our research shows that most small firms recognise the damage caused by cash flow problems but that doesn’t guarantee their immunity.
“The worst case scenario is insolvency but in our experience, slow paying invoices are often to blame. As working capital and cash flow are by their very nature dynamic, most traditional systems have failed to keep pace over the last few years.
“We have taken a fresh, tech-driven approach that builds on some of the lessons learned in the fast growing alternative finance sector. By combining deep sector experience with a high-touch personal service and cutting edge technology, the process is made as straightforward and efficient as possible.”