What Help Is There For SMEs Facing Financial Difficulties?
Helen Pettifer FRSA
Vulnerable Customer Trainer & Consultant | Workplace Suicide Prevention | Public Speaker
Rising costs have increased the number of customers who can’t pay for essential services. They are struggling to balance income and outgoings and often face a deficit at the end of the month. However, customers aren’t alone, as a growing number of SMEs are facing financial difficulties. We usually focus on conversations with customers who can’t pay. However, in answer to recent requests, we want to share support that’s available for small businesses in the red.
Why Are SMEs in Financial Difficulty?
One of the biggest challenges for SMEs is bad debt, with 40% reporting late or non-payment of invoices. Those unpaid invoices cause cash flow issues and take considerable time to chase. Many can’t afford the cost or time of taking proceedings to court, so debt is written off. As a result, accounts are impacted. According to data from the Federation of Small Businesses*, bad debt has resulted in around 50,000 SME closures this past year.
Secondly, businesses have been affected by rising costs including materials, fuel and corporate tax. What’s more, increasing the minimum wage and National Insurance payments is good for employees, yet, it adds to the financial strain on business owners.
Thirdly, a British Chamber of Commerce survey** highlighted that half of businesses found it harder to get funding, which impacted their resilience to cash flow challenges.
In addition, there have been issues with lost revenue due to disruptive events such as floods and power cuts and, in some cases, poor money management. Whatever the causes, a growing number of SMEs need support to stay in the green.
What Support is Available to Small Businesses?
Debt Advice for SMEs
Firstly, if your business is struggling to pay its bills, contact the companies you owe as soon as possible. There may be opportunities to agree on payment plans that spread the cost and prevent the situation from becoming a debt spiral. There is further advice on affording business bills on the Citizen’s Advice website.
Other sources of support include Business Debt Line, a charity that offers free and impartial debt advice to sole traders and small businesses.
Business Funding
If you are seeking funding, the Government’s Business Finance Support service lists current funding opportunities. These are typically limited to companies in a specific geographical location, industry or particular type of investment. Therefore, you need to search for any that are relevant to your business.
Help with Bad Debt
If you are chasing unpaid invoices, you can contact the Small Business Commissioner to report the issue. You’ll find helpful information on their website, including details of the new Fair Payment Code. This aims to increase accountability, particularly when large firms fail to pay small businesses.
Also, check out your business insurance, as it might cover legal advice, mediation to resolve disputes or provide legal document templates to aid your communication with late payers.
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General Business Support
Business Support Service can direct you to relevant organisations or advice to help you address many issues and get back on track. To access this service, call 0800 998 1098 in England, or visit the Scottish, Welsh or Northern Irish websites. Another option is the Business Advice Centre, although this is a paid service.
How Can SMEs Build Financial Resilience?
Payment Terms & Planning
To reduce the risk of unpaid invoices you can review your payment terms and clearly state them in contracts. Include information on:
Also, prepare a process for chasing overdue payments. Start with a polite phone call to highlight that the payment is outstanding and ask when it will be paid. This can be followed up with several automated email reminders. Then, a formal letter to outline what actions you will take next.
Consider payment plans and other solutions that will increase the chance of getting paid by debtors who are facing financial struggles. In addition, ensure that you pay all invoices and bills on time. This prevents your business from being charged interest or incurring fines.
Reducing Expenses
When it comes to expenditure, consider the ideal timing. Delaying an investment by a few weeks or months can reduce the risk of a deficit account. Your accountant can advise on other strategies that support financial resilience.
Consider temporary resources, such as freelancers and hiring equipment to cover peak times or in the early stages of growth. This offers greater flexibility and a chance to see if a longer-term investment is necessary. There may even be opportunities to collaborate with other businesses and pool resources to cut costs.
UK Economy Depends on SME Success
To end on a positive note, we want to recognise that the UK economy depends on SME success. The 5.5 million small businesses account for 99% of all private companies***. Fortunately, an Aviva survey**** reveals that 89% feel positive about the year ahead despite the current challenges. Getting access to the right support at the right time will help more to keep trading.
Blog and Web Page Content Writer
1 个月Most want to pay and payment options help increase the chances of them being able to.
Managing Director at Exterior Solutions Ltd
1 个月Great advice thank you Catherine. We work a lot with bigger companies and try to work with the smaller ones too. Being flexible with payments is a plus. Just takes a bit more patience and consideration there is always a way.