Negative Cash Flow Affected Small Businesses in the UK for 4.5 Months in 2021

Accounting software company Xero has released a report investigating cash flow challenges facing small businesses in Australia, New Zealand and the United Kingdom.  The report, titled Crunch: Cash flow challenges facing small businesses, prepared by Accenture, has shown that more than 9 in 10 businesses experience at least one month of negative cash flow each year, and up to 1 in 4 businesses are cash flow negative more months than they are cash flow positive. 

The crunch is even worse for small businesses, which experience negative cash flow for four months on average every year. For six months of the year, one in four small businesses in the United Kingdom had negative cash flow. 

Companies who are unable to get paid on time can face major financial struggles. In the face of rising expenses, interest rates, and reduced consumer spending, the situation is only likely to worsen in the near future. Late payments lead to cash flow problems for many small businesses that don’t necessarily have cash reserves on hand. In this difficult trading period, Jim Churchman, Managing Director of Fund Flow, says businesses need a contingency plan for late payments. One way to increase short-term cash flow is to turn invoices into cash through cash flow funding. The process is quite simple. Once your account and credit limit for invoice financing is approved, the business submits invoices they want funding for.

When asked how his product differs from traditional invoice factoring, Churchman explains that “Factoring companies typically take over all your debtors’ ledgers and can lock you into long-term contracts, with monthly fees. FundFlow has no long-term contracts or administration fees, and you only pay for the service when you use it. It’s perfect for businesses that need a little extra cash flow help from time to time. With FundFlow, you can nominate and sell individual invoices to improve your cash flow”.The company takes a personal approach to each client, and tailors a solution specific to each client’s debtor finance needs. 

According to Accenture’s study, seasonal slowdowns also affect small businesses. In the winter months, 43% of United Kingdom small businesses have negative cash flow, compared to 39% in the summer. With less cash expected in these months, Churchman recommends planning ahead. By putting in place a line of credit for invoice financing, you can alleviate some stress over this time.