More businesses struggling because of cash flow

The figures come from leading Midlands business recovery specialist, Cranfield Business Recovery which surveyed over 50 leading accountants in the region. Following the results Cranfield is highlighting the importance of understanding cash flow in order to support working capital.

Even if a company is profitable it can still experience cash flow difficulties due to late payments from customers, a lack of sound financial management, declining sales, and increasing overhead costs. Rapid growth can also cause cash flow difficulties with financial resources not keeping pace with rising overheads needed to sustain growth.

Cranfield also advocates monitoring cash flow during certain times of the year and at critical points in the business cycle. In January, the closure of most businesses over the Christmas period often has a knock on effect leading to late payments after the holidays. In addition, many companies have tax bills due at this time of year.

Brett Barton, director of Cranfield Business Recovery said: “We see a high volume of businesses struggling because they have not acted early enough in taking effective precautions for managing their cash flow effectively. These issues are more prominent with the small to medium size businesses. There are a number of processes that can be put in place in preparation for 2013 such as preparing a daily or weekly cash flow plan that is regularly assessed and updated as well as actively pursuing overdue customers for payment.”