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With potentially $22 billion in unpaid invoices this festive season, brokers could benefit by reaching out to help their SME clients’ cash flow.
Following the accounting platform Intuit QuickBooks’ report that small businesses face a potential $22 billion cash shortfall due to unpaid invoices in the festive period, The Adviser reached out to brokers to see what trends they were seeing and how they are helping their clients during a difficult time.
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As businesses look to build up to the holiday period, either for a bumper trading season or for a mandatory shutdown, brokers should be aware of the cash flow concerns that can be “typical” for this time of year, says Paul Thompson, a director at Atlas Broker.
Mr Thompson told The Adviser, that it was “very typical around this time of year that payments start to getting pushed out or extended due to companies focusing on cash flow”.
He said that those in the construction industry were particularly concerned with cash flow management because they face “essentially national shutdowns and they’ve got wages to make and all those other bills to make whilst they’re not getting any income coming in the door”.
Mr Thompson added: “Then on the other side where you’ve got an influx or a boost or purely because of the nature of their businesses, the same sort of thing tends to happen because there’s a quick ramp-up on revenues, which means that there’s a lot of underlying expenses that go along with it.
“To get that cash cycle to sort of catch up with itself, it does mean that there tends to be a few lingering issues with payments and things like that as well.
“At this time of year, it’s always pretty standard that it tends to ramp up and it’s just that cash flow cycle just trying to catch up with itself.”
To help his clients experiencing cash flow problems, he said he looks to use either invoice finance (debtor finance) if it is an ongoing or lingering issue with cash flow, but if it is a more cyclical item, he’ll look to use short-term business loans.
Speaking to The Adviser, senior finance broker at Inovayt, Ben Robinson, stated cash flow management for small businesses was a key issue.
Mr Robinson said: “I think it’s one of those issues that a lot of businesses run into if the owners have built the businesses from the ground up.
“They usually get to a point in the growth phase where they might have grown too quickly and they don’t have the cash flow to support all of that, so where we have helped a lot of clients is understanding what their growth requirements are and putting a capital strategy together.
“For a lot of businesses the cash flow dries up and then they look at their options and that can be a harder way to look at it reactively because a lot of lenders will rely on BAS or trading statements to provide cash flow facilities.”
To help his clients, Mr Robinson said he looks to set up secured lines of credit and secured overdrafts as well as looks to “set up any of their brick-and-mortar loans to interest-only”, which he said can help with both taxation and cash flow benefits.
Conversely, founder and director of TM Finance Group, Belinda Gibson, told The Adviser that the clients she was seeing had not been facing cash flow struggles, but instead were generally looking to grow and expand.
Ms Gibson said that she looked to work closely with her clients’ accountants and go through their figures, looking at variances between the years to ensure that there were reasons for changes between the years and that their cash flow management remains buoyant.
Work that she has been seeing recently is helping businesses expand and develop as they grow in size.
“So we recently helped a plumber who’s wanting to build a second shed on his property because his business is in a growth stage and he’s bought some new equipment that he wants to house,” Ms Gibson added.
[Related: Unpaid invoices mean SMEs face potential $22bn shortfall]
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