Worried businesses to keep the faith

With the economy still faltering in the first quarter of 2012 and the economic climate predicted to remain static or shrink even further according to some analysts, business owners are rightly worried for the future of their companies. Over a third of SMEs have found it harder to fund their businesses over the past 12 months and one in five has no credit balance available in their main bank account leaving them highly vulnerable to closure.

Despite this gloomy outlook, the quarterly Red Flag Alert report by Begbies Traynor indicates that financial problems fell by 17 per cent across all sectors in the first three months of the year, which should bring some hope to companies that are currently finding it difficult to see beyond 2013. However, whether the economy is buoyant or in a recession, all businesses need to have sound financial management and control, and many require the help of professional experts to keep them on track. The problems that many businesses experience which may cause them to fail are usually the same whether the economy is buoyant or in a recession. These include poor management and strategic planning, cash flow problems, and staffing issues. Although these problems can be more pronounced in a tough economic climate, companies are wise to seek advice if they spot signs of business distress even there is more optimism.

SMEs account for 95 per cent of UK companies, employ seven million people, and contribute £600 billion to the UK economy and the number of SMEs across the UK continues to increase, which is typical during periods of economic turbulence. It is important, therefore, that the right support is offered by professional advisors like Cranfield to ensure business continuity and even growth if there is to be a positive effect on the economy as a whole.

Within the report Professor Francis Greene said: “Small businesses are the backbone of the UK economy yet they face real challenges in surviving in today’s climate. In order to provide small businesses with effective support we need to understand their immediate needs.”

Tony Mitchell, managing director of Cranfield Business Recovery said: “The recent budget announcement arguably still offers no relief to UK SME’s. The biggest disappointments being that no leeway was given to small firms around business rates or fuel duty resulting in higher outgoings for these companies who are already struggling. Although much attention has been put on to the tax simplifications, the Government does not yet appear to have made any significant changes that will help SME’s and encourage a fundamental change in the current economic system.”

Businesses are struggling in a number of ways at present, and one of the key indicators that a business is experiencing difficulties is when they are not able to meet tax deadlines. According to the latest figures from British SME, 11 per cent of small business owners are experiencing difficulties in paying their tax bills, and a further 7 per cent have missed tax payments in the past year due to not being able to access external finance.

Tony continued: “When coping with a struggling business, many business owners are reluctant to reach out for support in the mistaken belief that this will be yet another expense. However, accessing professional help as early as possible could make all the difference between failure or success. There are many companies that have come to us over the past ten years as soon as they started to experience financial problems and in many cases we have been able to provide a range of effective rescue and recovery solutions which has ensured continuity of the business.”