News that taxpayers, suppliers and landlords have lost £1.03 billion due to the collapse of big name retailers since the start of last year brought home the importance to small businesses of managing cash flow.
The figure for unsecured debt, revealed in a survey from Company Watch commissioned by a fashion retailer from Rochdale, Paul Turner-Mitchell of 25Ten boutique, was published in April against the background of continuing low levels of lending by banks to small firms.
It adds up to a perfect storm that can swamp a young business faced with a growing pile of unpaid bills, but lacking the cash to keep trading until the profits begin to flow.
Tight rein on spending
Sage, who make accounting software used by 800,000 UK businesses, has published an infographic which captures the scale of the problem. Making sure you get paid on time, while keeping a tight rein on spending, is vital to small and medium sized enterprises.
The £33.6 billion owed to small businesses in late payments in 2011 was an all-time high figure and 70% of small firms have experienced late payment in the past 12 months, according to the graphic.
On the company’s website, there are useful advisory pages for people who have just started or are considering starting up in business. Sage suggests 10 ways to avoid a cash flow crisis. Crucial is to keep a close track on your finances so that you will be immediately aware when a customer misses their usual payment date. Offering incentives for prompt payment can create a short-term cash boost.
On the outlay side, Sage suggests assessing the frequency with which you pay suppliers or tax bills. Is it possible to pay in instalments to make terms more flexible?
SJ Collections has the key to unlocking cash flow problems, so that you can keep more money coming in than is going out; pay suppliers and invest in new stock; and anticipate any shortfall in funds so that you can make contingency plans such as extending credit. All these are principles of good cash flow management. Sage advice indeed, but for practical help if your cash flow is already suffering don’t hesitate to call SJ Collections.