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Most SMEs the UK are managing cashflow by chasing late payers, tightening
expenses and paying suppliers later, a survey shows.
A total of 96 % that responded to the survey have strengthened their
grip on cash flow during the past 12 months as a direct response to the
recession.
Most businesses (76 %) tried to do so by chasing up late payers, while 67%
adopted tighter controls on spending and 41 % started to pay their suppliers
later, according to the research conducted by the Forum of Private Business
and Future Route.
In some cases later payment was due to a time or workload issue, as those SMEs
with limited resources in their finance departments were more likely to pay
later, whilst those with larger departments were more likely to negotiate.
The survey also showed how businesses rated the success of various methods of
improving cash flow.
Although just three per cent of businesses surveyed accessed credit from invoice
discounters, 67 per cent of those who used it said this was a very successful
means of improving cash flow.
Leasing and deferring tax payment under the Time to Pay initiative, run by HM
Revenue and Customs, also proved to be very effective.
Half of the 16 % of businesses that used leasing said it was a very successful
method, while nearly two thirds of the 25 % of firms that used the Time to Pay
scheme said this was very successful.
Out of the 76 % of businesses who chased late payers, 29 % said it was very
successful.
In terms of monitoring supply chains, 31 % of respondents said credit checks
were the most effective means of doing so, 13 % said checking the latest
management accounts and six per cent said monitoring the latest audited accounts
was the most effective method.
Some 50 % of firms, however, said none of these measures were effective.
Some SMEs felt that credit checks and audited accounts were not updated quickly
enough and that companies hide major problems from their supply chain.
But the research shows that, in terms of how business owners have minimised risk
to their company, 48 % said they produce regular internal management accounts
while 41 % carry out credit checks on key customers through a credit reference
agency.
The survey also showed strong opposition to passing management accounts to
utilities companies, with just three per cent willing to do so.
Source: Credit
Control Journal
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