Almost a quarter of SMEs are at risk of serious cash flow problems as they do not have basic cashflow projection processes in place, according to a new poll by UK Top 10 accountancy firm Azets. 

The findings were revealed following a financial resilience webinar attended by nearly 200 SME leaders with nearly 30% of attendees disclosing that they either did not have a cash flow projection process (22%) or that they did not know whether there was one or not (6%).

The revelation comes as insurer Allianz Trade is forecasting a 15% increase in insolvencies.

Donald Boyd, partner & UK head of growth at Azets, is urging business owners to put cashflow projections in place for a minimum of 13 weeks.

Speaking on the regular Azets’ ‘Bang the Drum’ podcast, he says:  “Far too many SMEs still run their business based on cash in their bank account.

“Cashflow forecasting is critical to a healthy business and SMEs need a minimum 13-week cashflow projection or risk running out of cash. 

“The most important thing you can do is to know exactly what’s happening in the next 90 days in your business, so you can seek help, if necessary, based on early warning signs.

A large number of SMEs are receiving cash after 60 days or longer but are having to pay out within 30 days because of updated payment terms during the pandemic. This stifles growth because SMEs struggle to capitalise on opportunities, especially without appropriate financial forecasting.

Mr Boyd said that well-run SMEs that can ride the recession can emerge in good shape, but that good cash flow management is the key factor.

“SMEs are often better placed to pivot, reinvent themselves, and change their business model whereas larger businesses find change more difficult and costly,” he says.  “Either way, cash remains king and cash forecasting is the basis of good management and a successful enterprise.”

‘Bang the Drum’ is a new regular podcast for SMEs that focuses on the latest issues, trends and advice.   Bang the Drum, a new podcast by Azets | Azets UK