Many SMEs Not Financially Resilient

5th February 2018.

Research from a specialist bank has revealed that many self-employed and small businesses aren’t saving enough to prepare them for any future strains on cash flow.

The data from Aldermore, has found that more than 22 percent of businesses have no cash savings, while 40 percent hold less than £1,000. This doesn’t afford them much room for manoeuvre in the event of late payment or another financial crisis further down the supply chain. Other issues such as ill-health can risk a business’ turnover and should be prepared for accordingly. Here at the Credit Protection Association we encourage all our members to prepare for all eventualities. Whether your employees get sick or another Carillion collapses in the future, it is not wise to bury your head in the sand.

Of those surveyed by the specialist bank, more than half admitted they had experienced periods where they had been unable to earn money because of ill-health. Of those businesses who had experienced a period when they were unable to work, 48 percent remained off work for more than one month.

Typically, this costs businesses around £4,000 in lost revenues.

Lack of savings is not restricted to small businesses either.

Almost one in ten businesses with a turnover of £50,000 hold nothing in cash. The median average across the UK is £1,000 in cash savings.

With more than five million self-employed people in the UK and nearly five million more considering starting their own business in the next couple of years, Aldermore’s analysis highlights a need to improve financial resilience among freelancers and small businesses.

Starting a new business can be risky and trying. Many self-employed workers find their first year full of long hours and little reward. It can therefore be a pain to have to hold back a significant portion of your revenue for savings. Particularly for firms who do not boast a large turnover, it will be tempting to fight against saving for that rainy day. Whether your big, small, or somewhere in the middle, your financial standing can change in an instant. A supplier can fall into financial hardship and no longer be one of your prompt payers, or one of your key customers could become ill and no longer be an active player in your business. It is therefore essential you prepare for any obstacles that may befall you. When it comes to business, it is not wise to risk it. Here at the Credit Protection Association we have helped many business owners free up cash flow, and have encouraged them to start preparations early. We have years of experience, as well as being personal savers ourselves, so please get in touch with the details below!