Cashflow problems increasing for West Midland SMEs – Lloyds

THE number of West Midlands SMEs experiencing cashflow problems has increased in the last year, new data suggests.

According to new research by Lloyds TSB Commercial Finance, over a third of businesses (37%) in the region are experiencing difficulties. This is an increase on the same period last year when just over a quarter (27%) of businesses had problems with their cashflow.

The data is taken from the bank’s bi-annual ‘Business in Britain’ survey, which questioned 1,796 firms across the country – including 158 firms in the West Midlands – in a variety of sectors about issues affecting them.

Of those SMEs that experience cashflow difficulties, two thirds (66%) say that late payments are to blame. This is an increase on last year’s figure of 56%. Falls in demand and lack of business were cited by 43% of firms as contributing to cashflow problems.

The bank said many companies signing up to the Prompt Payment Code may be able to relieve some of the pressure on them.

Mike Scowen, regional director for Lloyds TSB Commercial Finance in the West Midlands, said: “Over a third of businesses in the region suffer from poor cashflow, and two thirds cite late payments as the main cause.

“There are several things companies can do to ensure that late payments don’t affect their cashflow. Prevention is better than cure, so carrying out background checks on customers, and setting out clear payment terms at the beginning of the relationship can help avoid any problems before they begin. In addition, widespread adoption of the Prompt Payment Code will mean that companies treat suppliers fairly, and late payments will become less endemic.

“Managing cashflow is one of the key concerns for businesses. For many SMEs, invoice finance can help them borrow against the future value of invoices, meaning they can avoid payment delays and improve their cashflow.”

The Business in Britain survey has been carried out twice a year since 1992.