One in three small businesses struggle to “make payroll or pay bills” due to cash flow issues

Almost a third of small and medium-sized enterprises (SMEs) struggle to make payroll or pay bills due to cash flow issues, a new study has revealed.

Accountancy software provider Quickbooks, which published the report, found that some 61 per cent of small businesses struggle with cash flow, while one in three (32 per cent) are unable to either pay vendors, loans, or themselves or their team because of poor cash flow.

The findings form part of Quickbooks’ new research report, entitled “The State of Small Business Cash Flow”. The global study focuses on the behaviours, attitudes and status of cash flow challenges experienced by small businesses and the self-employed.

Commenting on the findings, Quickbooks’ Alex Chriss said: “Every day, small business owners fight to deliver amazing products and services for their customers, but – with 50 per cent of small businesses going out of business within five years of opening their doors – the odds are stacked against them.”

The report comes after recent research revealed that some 65 per cent of large businesses have an average bill payment time of more than 30 days, while more than a fifth (21 per cent) report an average bill payment time of 50 days or more.

The long delays in payment often mean that the smallest firms at the bottom of the supply chain are bearing the brunt of major cash flow issues.

In an attempt to combat the situation, the Government has since launched the Small Business Commissioner’s Office, designed to help small businesses recover more of what they are owed.

Calling for the introduction of a ‘traffic light system’, which would warn businesses about a company’s payment practices before deciding to do business with them, the Small Business Commissioner, Paul Uppal, said: “Our ambition is to help small businesses make more informed choices when deciding which larger businesses they are going to trade with. A traffic light system would be a simple and effective visual way of highlighting which larger businesses are paying promptly and are working in partnership with their supply chain.”

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