Intuit QuickBooks has published the UK findings from its global research project The State of Small Business Cash Flow, which focused on the behaviours, attitudes and status of cash flow challenges experienced by small businesses and the self-employed. The findings 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
- 57 per cent of UK small business owners have experienced problems with their cash flow
- Over a third (38 per cent) 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 per cent 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.”
QuickBooks also found that over half (54 per cent) of UK small business owners run manual calculations in programs such as Excel to track their business’s bill payments. Using Excel leaves businesses at risk of important information, such as expenses, falling through the cracks.
As the 1 April deadline for Making Tax Digital (MTD) approaches, now is the time for small businesses to fully embrace digital to make their accounting processes – and by extension their lives – easier.
The study also showed that self-employed people are amongst those that can experience cash flow issues the most. They are 2.5x more likely than SMBs with up to 49 employees to experience cash flow issues on multiple occasions; yet are over 3x less likely than any other group to have ever applied for a loan. Financial Management Software (FMS) such as QuickBooks can therefore be a vital tool in supporting people who work for themselves – providing insight into business finances, enabling decisions such as taking out a loan to be made early and with confidence, and ultimately heading off repeat cash flow difficulty.
Chris Evans added: “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.”