Lack of cash flow named top reason for business failure

A lack of cash flow is the number one reason why businesses fail, according to Just Cash Flow PLC.

The SME lender says cash flow problems often mount up in December, meaning that brokers should be helping business owners put flexible facilities in place.

John Davies, Director at Just Cashflow, highlighted six key issues that cause problems for business around Christmas and the New Year:

* More stock is needed and has to be paid for to fulfil Christmas orders

* Extra staff are employed to help deal with increased demand 

* Suppliers often close down between Christmas and New Year and, even before this, accounts departments can be more focused on the staff Christmas party than paying invoices.

* Your own staff may need to be paid early (depending on when Christmas falls), and this is often the time of year when staff bonuses are paid.

* The end of the calendar year coincides with the end of your tax year and January is the month self-assessment tax bills have to be paid.

* Your customers may be slow to pay in January and February as they are experiencing exactly the same problems.

With this in mind, Just Cashflow is offering SMEs two facilities.

The 'StockRoller' facility provides businesses with the flexibility to purchase stock as and when needed so a business can supply and meet customers’ demands.

The 'WageRoller' facility takes away the worry of being able to pay staff on time and allows for wages to be paid even if a customer has missed a payment.

Derby-based Warner Projects Ltd, a specialist in the crafting and sale of jewellery, uses these two services.

Stephen Warner, owner of Warner Projects, said: "The greatest strain on our cash flow always comes in the fourth quarter but our existing bank wasn't interested in helping.

“Just Cashflow provided us with a quick answer, excellent service and above all the peace of mind that allows us to get on with running our business in the lead up to our busiest time of the year."