Cash flow continues to trouble small businesses

Over one third (38%) of small businesses in the UK have had cashflow problems during the past two years of economic downturn, according to new research from IGF’s ‘Small Business Survey 2010’.

Furthermore, 32 per cent of companies experienced cashflow problems so severe that they threatened to put them out of business in the same period.

According to the survey, companies have experienced cashflow problems mostly due to debtors paying late (56%), economic factors beyond their control (47%) or loss of revenue (i.e. lower demand) (45%).

Nothing too surprising there then. A key point for students to remember is that these survey results are averages. Small firms in some sectors or industries will have been affected even worse than the average - particularly in markets where the problem of late customer payment and sudden reductions in demand is endemic (e.g. housebuilding & other construction).