For UK companies cash flow will be of increasing importance

According to Hitachi Capital lnvoice Finance, UK SMEs are going to show an increased appetite for finance, with the total credit offered to businesses in the tax year commencing April 2015 totalling £841million, up from £823million the previous year. For UK companies cash flow will be of increasing importance.

Business activity in 2016 is likely to be impacted by a number of external factors, in what is set to be a volatile landscape for political and legislative change. In general, the days of firms using an overdraft facility as a ‘stop-gap’ to ride out cash flow disruption are over, businesses must act now to produce accurate forecasts for the year ahead.

John Atkinson, head of commercial business at Hitachi Capital Invoice Finance, said.

New rules could impact on cash flow

The introduction of the National Living Wage will prompt an increased wage bill for many businesses and a high proportion of them are still bridging the transition into pension auto-enrolment.

April also hails the implementation of new immigration laws which will prevent employees earning less that £35,000 per annum from staying in the UK for more than 5 years.  Commentators predict that this change could lead to increased recruitment costs for firms looking to hire and retain talented staff.

Mr Atkinson continues:

When forecasting activity and productivity during the summer months, the impact of the holiday season must be acknowledged. Often, a depleted workforce during July and August can have a negative effect on business continuity, with limited trading activity and the reduced ability to chase prompt payment denting cash flow.

That is why

It is vital that SMEs pay close attention to their working capital during 2016 and retain the agility to react to market changes. The possibility of an EU referendum, which is due to be held as early as June, alongside expected rises in interest rates could impact business confidence. For firms that manage to protect cash flow, either organically or via the securing of external finance, success, stability and growth await.

John Atkinson added.

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