Fears around cash flow and late payment has risen, says new study

Research by the employer support organisation has shown that 38% of businesses admitted cash flow was the primary cause of concern to their business, a 5% increase from last year.

The study also reflected increasing anxiety around finances in general. Worries around access to finance rose from 17% to 24% this year while the actual cost of finance went up from 6% to 8%. Lack of choice for finance marginally reduced to 19%.

Forum of Private Business chief executive Phil Orford said: “Taken in a wider context these results are alarming because it suggest a marked deterioration in SME confidence in their finances.

“We suspect this is a result of the banks’ ongoing failure to deliver affordable finance to small firms, and the fact businesses are increasingly worried about cash flow, and being paid late is surely linked.

“These are issues borne of credit being scarce and difficult to obtain – the recently announced OFT investigation into the lack business lending by banks underlines this,” he added.

More than half of firms said the Forum’s Credit Control Guide, which helps small firms get paid on time and manage their cash flow, would be beneficial, separate research found.

“Everybody knows cash flow and credit control are crucial areas for all businesses,” Orford continued. “It’s those firms who successfully manage these aspects of their business who are better placed to survive a one-off shock, and indeed who are more likely to be in favour with the banks for a loan.”

Respondents were also polled on attitudes to banks with ratings from one to five - one meaning no issue to five being seriously damaging and anything over three classed as harmful to their business. Bank charges scored the highest with an average rating of 3.6, up from 3.23 in 2006. Collateral requirements, reduction or calling in of a loan or overdraft and the availability of finance all rose significantly and received ratings of over 3.2.

To receive a copy of the Forum’s Credit Control Guide ring 0845 130 1722.