Almost one in seven SME owners can’t pay staff due to cash flow issues

New research from QuickBooks shows the extent to which small business owners suffer from cash flow issues.

Almost one in seven business owners have been left unable to pay their staff due to cash flow issues, according to QuickBooks.

This means that 2.2 million people in the UK may not have been paid on time.

A sizeable 57% of UK small business owners have had problems with cash flow. These issues forces them to turn down work, losing them £26,000 on average.

What is causing cash flow problems?

They can be sparked by late payments from clients and customers, a decline in sales and a lack of rigorous cash management.

Statistics from the BACS payment scheme show that late payments have a direct cost to SMEs of £2 billion. Off the back of this year’s Spring Statement, the government has committed to the introduction of payment practice reporting in which large companies will have to review and report on how they’re paying suppliers in their annual accounts.

Debt and money management struggles

Over a third (38%) of those who’ve had cash flow issues have been unable to pay their debts. QuickBooks’ research also found that small businesses have an average of £31,055 in debt owed to them.

A huge 71% of small business owners have lost sleep over cash flow worries.

Perhaps this is down to how they handle their finances. Over half (54%) of UK small business owners run manual calculations in programs like Excel to track business bill payments, leaving them at risk of losing important information like expenses. Making Tax Digital is fast approaching and it’s the ideal opportunity to update to your software.

Self-employed people suffer the most

Self-employed workers are 2.5 times more likely than SMEs with up to 49 employees to have cash flow issues on multiple occasions. They’re also three times more likely than any other group to have applied for a loan.

Chris Evans, VP and county manager at Intuit QuickBooks, said: “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.”

Analysis shows that raising an invoice on mobile gets people paid after an average of eight days instead of 28. Digital bookkeeping ensures that every time an employee gets paid, an invoice is sent or a customer makes a payment, the info is tracked and updated.

More on cash flow

How to supercharge your business cash flow

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Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.

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