Cash flow hurts one in four firms

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One in four small and medium sized firms in Yorkshire are facing cash flow problems and more than half blame their problems on late payment.

Their plight has been highlighted by research carried out on behalf of Lloyds TSB Commercial Finance.

The bank is urging companies to follow its lead and sign up to the Prompt Payment Code, which involves committing to pay suppliers on time.

Lloyds TSB Commercial Finance’s Yorkshire regional director, Mike Scowen, said: “Around a quarter of businesses suffer from poor cash flow, and over half cite late payments as the main cause.

“There are several things companies can do to ensure that late payments don’t affect their cash flow. Prevention is better than cure, so carrying out background checks on customers, and setting out clear payment terms at the beginning of the relationship can help avoid any problems before they begin.

“In addition, widespread adoption of the Prompt Payment Code will mean that companies treat suppliers fairly, and late payments will become less endemic.”

Mr Scowen is also suggesting SMEs consider using invoice finance to ease their cash flow problems.

Invoice finance allows companies to borrow against the future value of invoices, allowing them to avoid payment delays.