Almost All Small Businesses ‘Lose Money At Least One Month A Year’ - TS Partners
by Liz Seyi Digital marketing managerNew research was undertaken by a leading
professional services company, and the accounting software specialist Xero has
made alarming discoveries on the subject of many firms’ tendency to lose money
for much of the year.
Among those findings was that 94% of small
businesses have at least one month during the typical year when their costs are
higher than their income, meaning they are effectively shedding money.
In fact, the research found that the typical small
firm loses money for a third of the year. Almost one in four (23%) small
businesses have monthly outgoings higher than their revenues for more than six
months a year.
“Persistent and systemic”
challenges with cash flow for many small companies
The researchers scrutinised the money that entered
and left the accounts of 200,000 small firms with annual revenues of below £6.5
million, and which made use of Xero software in the UK, Australia, and New
Zealand during 2021.
Xero’s chief customer officer, Rachael Powell,
commented: “The report reveals just how persistent and systemic these cash flow
challenges are for small businesses. Healthy cash flow is essential to a
thriving business, yet our research shows that the vast majority of small
businesses are having cash flow issues at least once a year.”
Significant numbers of larger
firms continue to pay their suppliers late
Another longstanding source of frustration for many
small businesses is the difficulty of ensuring they get paid for their services
provided to larger companies.
It is hardly encouraging news, then, that according
to the Xero research, more than half (55%) of large organisations have been
paying their small business suppliers later than the agreed payment terms in
the last 12 months.
And yet, 78% of such firms admitted they knew full
well the potential impact of this on the business of the supplier.
As for the reasons for small firms being paid late,
the large businesses quizzed cited inaccurate invoice details as the primary
factor. This was followed in the list by it being company policy to prioritise
sending payments to larger suppliers first, and there was also evidence that
large firms were making a conscious decision to conserve cash by not paying
immediately.
More than four fifths of the large businesses
questioned said that if “late payments” were renamed as “unapproved debt”, this
would cause them to consider paying suppliers on time.
With regard to the small firms’ opinion on this
issue, 82% of them said that the Government needed to put more effort into
tackling the problem.
In the words of Alex von Schirmeister, a Xero
managing director: “There must be appropriate incentives for large businesses
to pay their suppliers on time, and stricter penalties when it comes to paying
late to prevent further cash flow instability.
“Larger companies have been let off the hook for
too long. Just imagine how economically productive our small business economy
could be without the toil and stress of chasing payments.”
As for if your own firm would appreciate
specialised and informed help with Xero in Newton Abbot, Plymouth, or Wellington to support your efforts to
keep on top of your business’s finances, you are welcome to enquire to the
Xero-certified TS Partners team
today via
phone or email.
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Created on Dec 1st 2022 04:16. Viewed 129 times.