Do the math: 70% of SMEs try to manage cashflow themselves
Cashflow, the money a business has in the tank to function, can make or break businesses. The latest MarketInvoice Business Insights explored the attitudes of UK SME owners on managing cashflow.
What is cashflow? Put simply, cash flow is the money your business has readily available to use for day-to-day operations. Put less simply, it is whether your current assets are enough to cover current liabilities. Cashflow is also sometimes referred to as operating liquidity, working capital and current ratio.
Over half (52%) of business owners said they relied on making ad-hoc paper notes, using spreadsheets or relying on text messages from their bank to understand their cashflow position. Meanwhile, 18% reported using online accounting software to do so. Overall, 70% are taking it upon themselves to manage this. Only 30% were using an accountant to manage cashflow information.
Cashflow is clearly something front-of-mind for SMEs with almost half (45%) of business owners checking their cashflow position on a daily or weekly basis to ensure they have the means to continue the smooth running of their business.
Anil Stocker, CEO at MarketInvoice, commented: “Every business needs to know their cashflow position but the disproportionate manual focus on this can distract entrepreneurs from focussing on their business and driving growth. Managing cashflow needn’t be such a taxing affair with the plethora of online tools available today.”
Cashflow constraints mean that 87% of businesses are prevented from taking on more orders. Yet, two-thirds (67%) of business owners aren’t seeking any advice about cashflow. Of the businesses that ask for help, the majority (14%) are turning to their business bank manager. Furthermore, in shoring up cashflow, almost half (48%) of business owners reported increasing their bank overdraft facilities and one in six (16%) used invoice finance to tackle cashflow constraints.
Anil Stocker added: “It’s imperative that business owners get advice to manage their cashflow. We can’t allow UK economic growth to be stunted because of cashflow constraints. Businesses waiting on long payment terms can use invoice finance to help bridge the gap by getting an advance on their invoices and propel their businesses forward.”