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It's a Jungle Out There
Small businesses dream of signing up big corporates
All of which means, of course, that small firms are taking on even more
as clients. But dreams turn to nightmares when the
debt to survive.
large clients put the squeeze on payment terms,
In the same vein, latest research from HSBC Commercial Banking
boosting their own cash flow at the expense of the found that one in five small businesses reported suppliers are billing
little guy.
quicker and a further 20 per cent said that fewer companies are
paying within agreed payment terms.
A recent case highlighted the issue when MTa International, a small
business, forced pharmaceutical giant Boots to backtrack on plans to According to the survey among senior decision makers of 596 small
make suppliers accept increased payment terms from 30 to 75 days. and medium-sized companies, 40 per cent of SMEs are raiding
John Wright, Federation of Small Businesses national chairman, said at savings and 24 per cent relying on overdrafts to manage their
the time: "Big companies appear to be aware that small businesses everyday finances; 18 per cent used their overdraft to fund big
are afraid of taking them on over payment terms and are abusing purchases, such as business vehicles and equipment, with 11 per cent
their power as a result. Making small businesses wait 105 days for turning to their credit card for business investment.
payment and charging them for the privilege of doing so is nothing
short of outrageous. At a time when small businesses are finding it
The research found that 1 in 10 are already using invoice financing to
difficult to deal with a slowing economy and rising costs, it is shocking
actively manage their cashflow while nine per cent are using leasing
that large companies think it is acceptable to use them as an
finance to help capitalise on their assets.
unofficial source of credit."
Noel Quinn, HSBC's head of commercial finance for Europe, said: “We
As a result, businesses are turning to bridging loans to keep going and
are urging businesses to talk to their trusted advisers to ensure they
companies who provide them are making big bucks as a result.
have the right financial tools in place for the current environment. Our
Bridging Finance Ltd, a leading short-term funding provider, has
research tells us that many are still turning to their own personal wealth
revealed it is on course to record profits after its loan book surged to
or overdrafts to fund their businesses and there are often more suitable
more than £75 million.
solutions. Asset finance can help companies to capitalise on their
assets when borrowing for growth and international expansion, while
“Small businesses worry they will damage relationships with clients if
invoice finance can remove the headache of late payments and
they question invoice payments,” Chris Baguley, the company's MD,
debt collection. Quicker billing and longer payments can put pressure
says, “and in the current economic downturn, late payments are
on small businesses and form an unsustainable cycle, but SMEs can
becoming more common as businesses are dragging their heels
break this cycle.”
when settling bills. Cash flow problems are being compounded by the
changing of terms mid-contract. Small companies can have serious Later in the magazine, in our Knowledge section (page 18), there are
problems and even be pushed out of business if they have to wait several articles on how to cope with the financial pressures of the
extra weeks for payments. Rising costs and falling revenues are making downturn and they all have a common theme: get professional
the situation even tougher.” advice!
It doesn't say how much of that is in the south east, but you can bet
your life it is a sizeable chunk, thanks in part to the grim road system,
plagued by under-investment and dreadful planning. But human
failings are the root cause of most lateness. Respondents from nearly
half of the SME's in the south east admitted to being over an hour late
on a regular basis to important business meetings, blaming busy
schedules and inadequate forward planning.
And those that try to combat this issue by relying on satellite navigation
systems are still facing delays, with 10 per cent of workers from the
south east getting lost because of incorrect directions.
However, it’s not just lack of planning and wrong directions that cause
problems for businesses; the research shows that business owners and
South East businesses waste
managers are taking all kinds of short cuts to save time whilst on the
move. Nearly a half of time-poor business drivers in the south east
hours on the roads
claim to be having food and drink on the move in order to save time.
Over one million working hours are being lost each
Furthermore, 26 per cent of those surveyed from the South East
year by businesses in the UK due to business owners
were prepared to pay parking fines in order to get to meetings on
time and 29 per cent said they had incurred speeding fines on
and managers running out of time to make important
their way to the office.
travel preparations, according to a report from Bibby
Financial Services. We must be mad.
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