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Tuesday, 9 September 2008

Cashflow problems abound

Getting paid by our 25 odd clients has been tough going in the last month! Since late July we have heard the same replies to our questions from companies across a diverse range of sectors and business types.

"Customers not paying us, we are chasing them hard."

"Cheque bounced from a customer, we are really struggling for cash".

"Our clients signed the order, have had the invoices, but payments dead slow or stop"

"Our factoring company is disallowing more and more of our debtors for age and concentration"!

So whats going on out there?

If our small firm has 25 people saying broadly the same thing (yes their businesses are all insolvent but all creditors payments have been frozen!) then my belief is across the UK, debtor days are rising.

End in sight to the credit crunch, don't bet on it! SME businesses are reporting cashflow problems to us across the board, Banks are being cautious but not withdrawing facilities, just applying covenants and making sure companies are watched.

We will see more pressure between now and January, in particular, on debtor days.

My advice to people is to use credit checking carefully, know who you are dealing with, use a tool like Risk Disk or Creditsafe UK to assess risk, both are inexpensive. Don't give slow payers more credit!

When a customer does not pay on time, the boss should get on the phone to the customer's boss and chase it hard. Don't let their cashflow bring yours down!

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