Insight & Analysis

Cash flow a major problem for many UK businesses

Increasing stacks of coins

Firms are struggling to pay their invoices due to cash flow issues and are turning to wider payment options for customers to encourage them to pay their bills on time.

Problems with cash flow mean that almost half of UK businesses avoid or delay paying bills due to issues within their cash flow, according to an annual survey of finance professionals.

The FinTech Barometer 2019 study by order-to-cash solution provider Onguard says 44% of UK firms highlighted cash flow as their major issue. Other commonly cited reasons for non-payment of invoices include receiving an incorrect invoice (21%) and corporate bureaucracy (20%).

The survey of 1,000 finance professionals also reveals that firms struggling to pay bills are looking to combat their cash flow problems by trying to offer a wider range of payment options (30%) to customers in order to speed up payment of outstanding invoices. Some (18%) have even begun to adopt a personal payment approach to both B2B and B2C customers which includes paying through WhatsApp, Messenger or email and 6% of companies pass late-paying accounts to debt collection agencies. However, there are still some companies (13%) which have no procedure in place to speed up payment of outstanding invoices.

Marieke Saeij, Chief Technology Officer at Onguard says: “There will always be outstanding invoices. It’s something all businesses have to deal with. The key is to address it as quickly as possible, so cash flow is not affected. Today, companies endeavour to act in the customer’s best interest. If a customer has personal reasons for being unable to pay an invoice, it is usually a temporary problem. In these cases, passing the account to a debt collection agency exacerbates the problem rather than solving it.

“By gathering detailed information about your customers, you get to know their preferences. Do they want to receive a (giro) payment slip or would they prefer to settle the payment instantly through WhatsApp? It is essential to understand customer preferences because it allows for a personal approach. This not only improves cash flow but also increases customer satisfaction.”

Late payment to small firms in the UK is acknowledged by the government to be a major problem. According to research by the Federation of Small Businesses, 37% of small UK businesses have run into cash flow difficulties, 30% have been forced to use an overdraft and 20% suffer a slowdown in profit growth as a result of persistent late payment. The FSB says that if all payments to firms were made on time, 50,000 more businesses could be kept open each year, whilst the UK economy would receive a £2.5 bn boost.

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