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Charlie Mullins

Cashflow problems 'biggest risk to small firms'

Seven out of 10 SMEs see cashflow problems as the biggest risk to their business, according to a new survey.

The poll by Amicus Commercial Finance shows 38 per cent of SMEs have suffered from cashflow issues in the past two years, risking to 65 per cent among medium-sized firms with between 50 and 250 staff.

Over the past two years, one-in-seven (15 per cent) are still suffering liquidity problems and 12 per cent either came close to or became insolvent.

The biggest challenge caused by cashflow shortages is paying suppliers, cited by 41 per cent of business owners. This is followed by meeting debt repayments (30 per cent), buying inventory (29 per cent) and paying staff (24 per cent). One-in-five (18 per cent) said they had lost contracts due to cashflow problems.

On a sector basis, 35 per cent of finance and accounting firms reported being affected by cashflow problems. Regionally, companies in the North East have been the worst hit by cashflow shortages.

John Wilde, managing director of Amicus Commercial Finance, said: "Our research shows that most small firms recognise the damage caused by cashflow 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 cashflow are by their very nature dynamic, most traditional systems have failed to keep pace over the last few years."

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