More businesses struggling because of cash flow
Forty per cent of financial advisers in the Midlands cite a lack of working capital as a major barrier to growth, reinforcing the fact that businesses need to be aware of how a cash flow plan can help to alleviate financial fears.
The figures come from leading Midlands business recovery specialist, Cranfield Business Recovery which surveyed over 50 leading accountants in the region. Following the results Cranfield is highlighting the importance of understanding cash flow in order to support working capital.
Even if a company is profitable it can still experience cash flow difficulties due to late payments from customers, a lack of sound financial management, declining sales, and increasing overhead costs. Rapid growth can also cause cash flow difficulties with financial resources not keeping pace with rising overheads needed to sustain growth.
Cranfield also advocates monitoring cash flow during certain times of the year and at critical points in the business cycle. In January, the closure of most businesses over the Christmas period often has a knock on effect leading to late payments after the holidays. In addition, many companies have tax bills due at this time of year.
Brett Barton, director of Cranfield Business Recovery said: “We see a high volume of businesses struggling because they have not acted early enough in taking effective precautions for managing their cash flow effectively. These issues are more prominent with the small to medium size businesses. There are a number of processes that can be put in place in preparation for 2013 such as preparing a daily or weekly cash flow plan that is regularly assessed and updated as well as actively pursuing overdue customers for payment.”
The cash flow crisis is reinforced by the latest figures from the Credit Services Association (CSA) showing that there has been a 12% increase in businesses outsourcing their debt with the current figure exceeding £1 billion. In addition to this HMRC is running a warning campaign aimed at businesses that have failed to submit VAT returns, where many will be due to cash flow issues.
Cranfield Business Recovery has helped many companies solve cash flow issues over the past ten years and previous clients have found that banks are often comforted when the figures have been professionally assessed and the business owner is willing to be open about his cash flow issues. Proactive communication with banks, suppliers and tax authorities is encouraged as it restores confidence that any issues are being dealt with.
Brett concludes: “Companies need to be realistic and prioritise their payments. If a company is unsure about this aspect of cash flow management then we strongly advise they seek professional advice before it is too late.”
Brett Barton, Cranfield Business Recovery, Tel: 024 7655 3700, Email: brett.barton@cranfieldbusinessrecovery.co.uk
or
Natalie Hunt, Bridge PR & Media Services Tel: 024 76 520025, Email: natalie@bridgepr.co.uk
Cranfield Business Recovery is a firm of insolvency practitioners which employs 16 staff in its Coventry office. At present they are the number one insolvency practice in Coventry. It was set up in November 2001 to offer a professional service to people with corporate, business or personal financial problems and to work closely with professional advisers to assist their clients. The firm is led by licensed insolvency practitioner, Tony Mitchell. It aims to offer a bespoke service in a friendly environment in circumstances that are often difficult and stressful.
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