49% of UK SMEs admit cash flow issues

Half of UK SMEs say cashflow is an issue for them, and one in ten have considered closing their business due to cashflow problems, according to research from Shawbrook which identifies rising costs and late payments as key drivers.

Neil Rudge, Chief Banking Officer, Commercial at Shawbrook commented: “An essential aspect of keeping a business afloat is cash flow, ensuring you have enough working capital for processes to run smoothly, pay wages and cover expenses.

But in times of economic uncertainty, this can be beyond the control of businesses and we’re seeing this take effect globally, with many organisations having to make challenging decisions in order to remain solvent.”

The poll of senior financial decision makers in a range of SMEs showed that 46% reported their cash flow issues are primarily driven by an increase in costs, while over a third (37%) pointed to late payments from their clients and customers, with this impacting smaller businesses with a lower turnover on a greater scale than larger businesses.

Other factors affecting cash flow included slow sales (27%), and unexpected expenses (26%), as well as volatility or seasonality in sales (25%). Complex supply chains are also causing issues for a quarter of businesses (23%).

Issues with cash flow have been a source of stress to businesses, with 38% of decision makers saying it is impacting them and their senior management teams. One in five (22%) said it had worsened their own mental health and nearly a third were concerned about the impact it had on staff morale (30%).

Growth plans are also being threatened by hampered cash flow, with 30% of businesses saying they had to delay their plans, and a further 27% have struggled to access funding.

A number of senior figures have even picked up business expenses with their own funds (28%), and 21% are in arrears with their supplies.

Finance options

In order to alleviate these issues, businesses have considered a business loan to make up costs (32%), while others considered alternative finance products such as cash flow finance (24%), asset finance (23%), invoice finance (21%), trade finance (19%), a merchant cash advance (15%) or asset-based lending (15%).

In addition, 1 in 10 have considered closing their business due to problems with cash flow, with the same percentage contemplating a sale (10%).

Responding to the findings, Rudge said: “Issues with cashflow take a toll on everyone involved, from heads of leadership to employees – but British businesses should remain resolute and seek support where they can. Businesses are the lifeblood of the British economy, and with the number of solutions at their disposal, there is no doubt that they can push through any challenge they are faced with.

“Finance can play a crucial role in helping businesses manage cashflow. Products such as asset-based lending and invoice financing for example allow businesses to smooth out their cash flow, creating more room for investment into the business.”