The SME Cashflow Index
We have all heard and read much about cashflow for SMEs recently. But the huge amount of statistics produced by the Banks, the Bank of England, et al, haven’t revealed the truth of what is actually happening. So I thought I’d have a look myself.
With the help of CEBR and some of our clients, we have compiled the first index of cashflow for SMEs in the UK (the full report is on our website). We looked at profit, working capital, and funds raised, all the elements of cashflow, over the last 12 months and calculated the % showing an increase compared to the % showing a decrease. The difference is an Index and the profit and working capital indices are tabulated here.
1. Conditions are tough. Cashflow was negative for over 75% of those surveyed, in the first three quarters of the surveyed period, and the chances of making a profit in any quarter were not much more than 50:50;
2. It seems that SMEs, contrary to UK plc, have either sacrificed profit to invest in growth (more marketing etc) or had cash receipts reduced due to UK plc’s stretching of credit terms, or both. This is only the first year of our review so it will be interesting to see if profits increase at a greater rate than working capital (or insolvencies increase) to determine whether SME Ltd has been able to invest or has had to prop up UK plc;
3. SMEs really are the heroes that Sir John Harvey Jones once described. Even though they have not had the same level of access to finance as UK plc, their level of insolvencies has decreased at a greater rate than UK plc, as shown in the full report. Whereas Jessops, Blockbuster etc refused to see the writing on the wall, SMEs have shown a greater ability to manage cash and their business model. Given that there is a greater cash hoard in UK plc than there ever was, I think it’s fair to say that the cream of British management talent is spread far and wide amongst many unsung heroes, rather than residing in the latest high profile recruit to a government campaign;
4. The Index has only a year of data and some trends will emerge over a longer period. For example, the number of companies raising funds is too small to be statistically significant, but it may be that credit easing has not helped SMEs as much as it was hoped. Maybe this Tory heartland, as well as the “swivel eyed loons”, is also being ignored?
Currently this is a small sample of capable businesses which, under the guidance of FD Solutions, are getting the support and cash that they need although they still have a mountain to climb. If you know of anyone else who would like to contribute their details to the Index (strictly confidentially of course) please let me know. We’ll update the results in September, after I’ve climbed my own mountain, Kilimanjaro.
The SME Cashflow Index