For SMEs, cash flow remains a key concern that needs to be closely monitored and managed to ensure the sustainability of the business.
That is the finding of the most recent Quarterly Economic Survey conducted by the British Chambers of Commerce.
It revealed that over half (53 per cent) of UK businesses are optimistic about increasing their turnover over the next 12 months. However, the impact of high inflation means that cash flow remains a top concern for 74 per cent of businesses.
Although there is optimism about future growth, the survey showed that only a third (34 per cent) of businesses reported an increase in sales since January, while 24 per cent reported a decrease in sales.
The retail and hospitality sectors were the worst affected by the current downturn, with almost two in five retail businesses seeing a fall in sales during the past three months.
According to the Bank of England, inflation currently stands at 10.4 per cent. This level of inflation is still being driven by considerable increases in food and drink prices, which have reached their highest rate in over four decades.
Cost pressures vary considerably across all sectors, with around 87 per cent of hospitality businesses reporting utilities as a factor driving price increases, while 86 per cent of manufacturers cited more expensive raw materials.
In addition, three-quarters of businesses reported little to no increase in investment in plant and equipment, a trend that has been consistent since 2017 despite several Capital Allowance schemes offering support.
Only a quarter of businesses plan to increase investment this quarter, despite the Government’s introduction of 100 per cent Full expensing to replace the Super Deduction relief from 1 April.
Given these challenging circumstances, SMEs must take proactive steps to manage their cash flow effectively.
This may include reviewing expenses, seeking out cost-saving measures, and exploring alternative sources of funding, such as invoice financing or asset-based lending.
It is crucial that SMEs prioritise cash flow management to ensure they can weather economic challenges and seize opportunities for growth.
By staying on top of your finances and adapting to changing market conditions, you can position yourself for success and ensure your survival.
If you need advice on cash flow, please speak with our experienced team today by emailing enquiries@stca.co.uk or calling 01494 552100.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 9th May 2023.