87 per cent of the UK’s small businesses cannot take on new orders because of problems with cash flow, MarketInvoice research has found.
A survey of 1,000 small firms by the business finance provider also found that two-thirds (67 per cent) of business owners are not seeking any advice about cash flow. Of the businesses that ask for help, 14 per cent are turning to their business bank manager.
48 per cent of respondents said they had increased their bank overdraft facilities to boost their working capital, while 16 per cent used invoice finance to tackle cash flow constraints.
Nearly half of all small business owners check their cash flow every week, the survey found, but 52 per cent rely on scribbled notes, home-grown spreadsheets or texts from their bank to understand their cash flow position. Only 30 per cent of business owners use an accountant to manage this portion of their business data.
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Cash flow is a measure of whether a business’s operating assets, like income, can cover its liabilities, such as payments to creditors. Business owners often find difficulties in maintaining high enough inflows to cover their outgoings because of delayed invoice payments from clients. Research by Barclaycard earlier this year found cash flow headaches kept most SME bosses awake at night.
“Every business needs to know their cash flow position but the disproportionate manual focus on this can distract entrepreneurs from focusing on their business and driving growth,” said MarketInvoice chief executive Anil Stocker.
“It’s imperative that business owners get advice to manage their cash flow. We can’t allow UK economic growth to be stunted because of cash flow constraints. Businesses waiting on long payment terms can use invoice finance to help bridge the gap by getting an advance on their invoices and propel their businesses forward.”