The small business cash flow conundrum

By Jake Martin

1 min read

Managing small business cash flow has been a major pain point for many organisations during the recession. In our report on how small business Britain has been faring during the economic downturn, we asked respondents of our survey what actions they had taken to overcome this challenge.

The most popular strategy undertaken by respondents to combat small business cash flow difficulties was renegotiating deadlines with customers. The opposite of renegotiating with suppliers, this measure appears to have been successful for the vast majority, with 71% seeing a positive result. 

While the second most commonly pursued course of action was to negotiate a loan, few businesses (one tenth) opted for this choice. However, of those that did successfully secure a loan despite the current difficulties in accessing credit from banks, 81% said that it had a successful impact on their ability to manage their small business cash flow difficulties.

Third on the list of actions to manage cash flow was negotiating trade financing. While this only applies to businesses that are involved in exporting, three of our respondents had negotiated trade financing to ensure that their customers pre-paid for their goods. Of those, two of the business stated that this strategy had proved successful in assisting their cash flow issues.

Invoice financing is a lesser known strategy for managing  small businesses cash flow difficulties, and this was reflected by the fact that again only three of our respondents had negotiated invoice financing with a factoring service such as their bank. Interestingly, of those three respondents, two said this strategy had not been successful in assisting their cash flow difficulties, while one was unsure. Therefore, any company considering using invoice financing for the first time would be advised to undertake careful research first.

It is clear there are a number of ways to combat cash flow difficulties so share with us your views and experiences on how to best manage small business cash flow during a recession.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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