Almost three in five SMEs have experienced problems with their cash flow, according to Intuit QuickBooks.

The UK findings of its global research project “The State of Small Business Cash Flow”, revealed the behaviours, attitudes and status of cash flow challenges experienced by small businesses and the self-employed.  These include:

  • Almost 1 in 7 UK small business owners have been left unable to pay employees – which means 2.2 million people in the UK may not have been paid on time because their employer had cash-flow issues.
  • Around 57% of UK small business owners have experienced problems with their cash flow.
  • Over a third (38%) of UK small business owners who have had cash flow issues have been left unable to pay debts.
  • UK small business owners lose £26,000 on average by being forced to turn down work, specifically due to issues created by insufficient cash flow.

Cash flow issues can be caused by late payments from clients and customers, a decline in sales and a lack of rigorous cash management. Problems with cash flow can ultimately seriously endanger a small business’ capacity to continue operating, resulting in management being unable to pay staff and suppliers.

The issue of late payments was recently addressed in the Spring Statement as a major concern for UK small businesses. According to statistics from the BACS payment scheme, the direct cost of late payments to small businesses is £2 billion. As such, the Government has committed to the introduction of payment practice reporting, which will require large companies to review and report on how they’re paying their suppliers in their annual accounts.

The QuickBooks research also found that UK small businesses have on average £31,055 in debts owed to them and 71% of small business owners have been kept up at night by concerns about cash flow.

Chris Evans, VP and country manager at Intuit QuickBooks, said: “Cash is oxygen for small businesses and without it they cannot breathe. The combination of chasing invoices and bad payment practices mean small businesses run out of accessible cash. This has a real impact on their ability to take on new work, pay suppliers, their employees or themselves on time.

“It’s time to realise digitisation in the back-office is not just a nice to have, but essential to the prosperity of any company. With features like automatically nudging clients to pay invoices, digital accounting can help tackle bad payment practices, reducing the time to get paid and free up time for business owners to invest in themselves or their business.”