Over half of businesses cite late payments as a cause of cash flow pressures

A new survey has revealed the scale and impact of cash flow pressure facing B2B SMEs across the UK and identified how these constraints are affecting their ability to invest and grow

The Censuswide research surveyed 500 financial decision-makers at SMEs that provide goods and services to other businesses. It found that two in five (39%) say restricted cash flow has prevented them from pursuing growth opportunities in the last 12 months, while one in six (15%) say that severe cash flow pressures are threatening the survival of their business.

Among businesses that had experienced cash-flow pressure, the most commonly cited cause was late payments from customers (55%), followed by rising operating costs including energy (42%) and higher wage costs or employer taxes (35%).

If cash flow were not a concern, however, over two in five (42%) would invest more in growth, including hiring, expansion and equipment. A third (34%) say they would take on more contracts and customers. This signals wider economic benefits if SME access to working capital could be improved.

Mark Finn, Chief Revenue Officer of eCapital said “SMEs are a major engine of the UK economy. As cash flow pressure mounts due to energy bills, inflation and increased cost of employment, we’re seeing too many businesses holding back from hiring and investment. We can also see them turning to unsustainable forms of borrowing, such as credit cards and short-term loans. Both options undermine SMEs’ ability to expand, making cash flow management a wider economic growth issue.”

The findings show that borrowing and credit already play a significant role in managing cash flow for SMEs. Over four in five (85%) businesses surveyed used at least one loan, overdraft or credit facility in the last year. Over a third have turned to overdraft extensions (38%) or credit cards and informal borrowing (37%), while three in ten (29%) are using short-term loans. Just 14% have a structured working capital solution in place. This pressure is taking a psychological toll on business owners too: almost a third (31%) say managing cash flow causes regular worry, while over one in ten (12%) have lost sleep over it.

Dr Clare Mulligan-Foster, BPS Chartered Psychologist and executive leadership coach  said “Financial uncertainty doesn’t just affect balance sheets, it changes behaviour. When we are unsure of something, our brain interprets that discomfort as a form of threat. By improving visibility over cash flow and building confidence in future financial resilience, however, businesses are better able to move from reacting to uncertainty to making deliberate, strategic decisions.”