Seek help before a cash flow hiccup becomes a crisis

Businesses that have the potential to fly are failing because of cash flow and capital funding shortfalls. The Marches Local Enterprise Partnership’s access to finance champion PAUL KALINAUCKAS says help is available

Cash is king in business, but the proportion of small businesses with no cash reserves has increased since 2020, according to a report by the Enterprise Research Centre.

Having a lot of cash on hand is normally a positive sign, and strong cash flows allow a company more flexibility in regards to business decisions and potential investments.

However, it is a sad truth that more businesses fail for lack of cash than for lack of profit. Most are micro-businesses employing up to nine people.

You can be extremely profitable but have the rug pulled from under your feet if you run out of cash. Less than 25 per cent of micro-businesses and about one third of small businesses estimate that their cash reserves would last more than six months, compared to about 50 per cent of medium and large businesses.

So, size does matter.

That is why it is important to build up some cash reserves to cope with the unexpected and to look at alternative finance options such as leasing or loans. Most businesses that grow will require external finance at some stage, particularly if they have increased orders that need more working capital to service.

Unfortunately, 80 per cent of failed businesses are the result of poor finance management and poor cash flow forecasting so, in 2023, make sure you review your finances and investigate whether greater support could help with the financial management of your business.

Your first port of call should be the Marches LEP and Marches Growth Hub, which can both offer practical support and access to grants and finance for a variety of purposes.

These include the Marches Energy Grant, access to more than 30 business support and funding programmes, and partnership with British Business Bank and the Midlands Engine Investment Fund for wider funding opportunities and links to a host of alternative providers.

The Marches Growth Hub also offers advice and workshops for anyone running a business. For more information, visit the MGH support finder for details.