Cash flow worries keep more than six in ten (63 per cent) SME decision-makers awake at night, with concerns about late payments specifically cited by one in three (32 per cent), new research has revealed.
One in ten (11 per cent) say they’ve even considered giving up their business as a result of worry about late payments, and money management is not only stressful, it’s time-consuming: SMEs spend an average of half a working day every week (3.9 hours) on cash flow activities.
The study from Barclaycard, which has helped make businesses successful for more than 50 years, also finds that a fifth (20 per cent) of small businesses cite cash flow as one of the biggest day-to-day obstacles impeding business growth, second only to the current economic and political uncertainty. In fact, working capital ranked higher than other common hurdles including high overhead costs (19 per cent) and worries around customer contracts (18 per cent).
The high level of worry about money amongst SME decision-makers highlights a need for solutions that will give them greater control over their financial situation. Securing this control could offer businesses the flexibility they need to take advantage of an unexpected sales opportunity or increased seasonal demand, safe in the knowledge that working capital won’t be a barrier to success.
Removing traditional cash flow pain-points could not only improve an SME’s financial situation, it also offers wider business benefits. Today, a third (32 per cent) of SMEs admit insufficient working capital has prevented them from growing their business.
Of these, nearly three in ten said that cash flow issues had stopped them expanding their product range (27 per cent) and attracting new customers (27 per cent). Almost a quarter (23 per cent) were held back from investing in new technologies to support their business, and a similar proportion (22 per cent) were prevented from opening a new office or location. With greater control over cash flow, SMEs could enjoy the flexibility and freedom to invest for success and take positive action to develop their businesses.
The cash flow wish list
The need for control is reflected in the SME’s cash flow ‘wish list’: the most popular solution for reducing working capital woes, chosen by a quarter (25 per cent) of small businesses, is the ability to guarantee a date when payments would be received from a customer.
This is followed by being able to protect their accounts receivable regardless of external factors (16 per cent) such as a customer going out of business. Having a broader range of options for paying suppliers (14 per cent) rounded out the top three, suggesting that some pain-points could be resolved by improving ways to both take – and make – payments.
Marc Pettican, Managing Director of Barclaycard Commercial Payments, said:
“Our research shows that working capital is a top priority for many SME decision-makers, with almost two-thirds saying cash flow keeps them awake at night and a third indicating it has impaired their ability to grow. This situation is wholly preventable with the right support, and we encourage small businesses to explore how they can reduce the time and energy they spend on managing working capital problems.
“Whether they are looking for a solution to help them seize a new sales opportunity or invest in new business technology, there are a variety of SME-friendly solutions out there, from a corporate credit card to a business loan. These will help small businesses gain greater control of their cash and reap the benefits that flow from it.”