Cash Flow Management is Key in Keeping Businesses Afloat

One of the biggest killers of small and startup businesses is cash flow. With over half of small and startup businesses failing in their first five years of business due to poor cash flow, it is something every business owner must learn how to overcome. Here are some helpful tips for you to avoid these pitfalls and make sure your business will not end up unable to operate due to lack of funds.

According to the ONS or the Office for National Statistics, only 50% of startups survive beyond the 5-year trial period and most often than not they fail to make it to their fifth anniversary as a business. Moreover, later studies have revealed that around 90% of small businesses and startups fail drastically due to bad cash flow. Although revenue and profits are very important, many businesses remain to trade in the short term even if they are suffering from a loss by delaying payment to creditors or working out an alternative pay strategy. But, once the superiors ran out of cash, without lending they can no longer augment daily needs, and businesses go to oblivion.

Without financial issues, publicly traded businesses, small to micro businesses need constant access to cash to buy inventory, meet business expenses, and pay suppliers, and employees, etc.

Research from Lovetts, a debt recovery law firm, revealed that 55% of the County Court Claims cases in 2015 resulted in a CCJ or County Court Judgment since the debtor was unable to pay. Approximately two-thirds of businesses in the UK experience late payments of 60 days and more, with invoices amounting to £55 Billion unpaid or outstanding. This phenomenon is killing small businesses.

Studies showed that small firms waste about 2 weeks of productive time chasing over invoices instead of spending time growing their business.

Late payments mean reduced profitability, late payments to suppliers, and produces decline in business growth. Hundreds of businesses have to close each year because of cash flow problems and not because there is a problem with their business. For instance, in the West Midlands alone, the average business in the area owed over one hundred eight thousand pounds in outstanding invoices, and an increase of over 90% in the past two years.

A new study conducted by financial experts further reveal that the importance of businesses with steady cash flow cannot be undermined as it helps in the overall business operation. The study indicates that more businesses are looking for financing, with an overall credit being offered to businesses in the tax year beginning April 2015 amounting to £841 Million from the previous year.

With many businesses following the practice of accessing alternative financial services like payday loans, the companies are relying on top lending figures to help SMEs with their funding resources, and with the number of applications increasing dramatically on an annual basis.

The importance of cash flow cannot be underestimated. Clearly, it is what keeps any business afloat and running. Short term loans such as payday loans can help not only individuals but also organizations and companies that need to keep their head above the water.

People From The UK Are Most Vulnerable To Payday Loans

Life can be tough; many of us had to work multiple jobs to ensure we augment our family’s daily needs. With the economic meltdown in the UK not helping at all, more and more people are finding themselves turning to payday loans for quick cash loans. But, why are more and more Londoners falling prey to this loan arrangements when it is sure to hurt their finances instead of do them any good?

There are various reasons why more and more Londoners are fast becoming prone to payday loans. Many claim that it’s fast and no-questions-asked policy make it the best option for those who are cash-strapped and wants money fast without having the need to provide financial documents to prove their financial capacity. London is an expensive city to live in, with lifestyle that is so high-maintenance, there is no wonder why too many people from the place are lured to the quick cash promises of payday loans. Londoners are walking in the tightrope of financial crisis and the chances of doom are rather high.

At the bottom of the pile, you will find payday loans. Debt accumulation has become a habit for many Londoners who succumb to these fast remedies as it is ‘fast,’ and they can buy all they want with it. Now, debt is seen as a problem or an in-depth social ill. And why? Simple, even the London government sets a bad precedent. The gross national debt peaked to over 90% of annual GDP and according to estimates by the IMF or International Monetary Fund, it will surely balloon at a pre-crisis level. This is a record high for London.

Why Londoners Are 60% More Vulnerable To Payday Loans?

It is a known fact that life is expensive in London that in any place in the planet. But, this has not prevented its citizens from living frugal lives or to even stop splurging. Londoners are very prone to take out their credit card or use payday loan to pay for a funeral and other emergency medical expenses.

Can you guess how much Londoners get into heavy debts just so they can cover unexpected expenses when their plates are already full? 10%? 15%? Not quite. A massive 40% of those who have been surveyed confessed that they had to take a payday loan or credit card with 39% interest rates to pay for their unexpected expenses.

With interest rates soaring to up to 22% more over the years, now it is high time to take the future more seriously.

With 80% of the UK adult population not having any contingency plans when the worst case scenario happens, they end up being caught unprepared, and payday loans are always by their side to offer quick cash loans. It’s very easy to get money and be buried in payday debts. It’s so handy and very hassle-free, and so the cycle goes on, and on, and on…BUT

The flip side to this is that there are thousands who have been able to rely on payday loans for emergency assistance. Payday loans are easy to obtain and can be used for health emergencies, accidents, or unforeseen expenditures such as an immediate trip. People who have no credit cards find payday loans convenient and easy since it doesn’t ask for collateral or require a lot of documents.

So in the end, being in debt is pretty much like everything else in life. It’s how you deal with it that counts.

Other Loan Alternatives That You Can Avail Of Aside From Payday Loans

Since a law has been enacted that places a cap on the costs of payday loans, we will delve deeper into other alternatives that people can avail of. Payday loans are truly a very appealing option for most people who are looking for money fast. There are even lenders who guarantee that they can send you £500 within 5 minutes. But, be ready because the loan interest can be very high, some lenders can go to as much as 5,000% in annual interest rates.

Also, there are charges for paying late and a lot of payday lenders collect repayments immediately from your debit card. These CPAs or continuous payment authorities enable lenders to get more payments from your bank or credit card with your express approval.

Here are some alternatives you can check out:

Credit Cards

For as long as you are able to repay your charges on your credit card in full every month, it’s guaranteed free of interest. So, this is a great and cheap way for you to borrow money for a short period of time. If you are unable to clear the card, you can always pay the interest. Credit cards, however, are not ideal for cash withdrawals as you will end up paying more than the amount you borrowed. You will find a lot of good credit card offers, there are those that offer up to 12 months with 0% interest rates.

Social Funds

Those who have low income and have no money for emergency cases can get help from the Social Fund. This of course, happens rarely and you have to show proof that you are truly in need. However, extreme cases like calamities or natural disasters could entitle people to qualify for this.

Credit Unions

When you need cash assistance you can instead opt for credit unions. Credit unions offer an affordable alternative to payday loans. They are owned and managed by its members. Many credit unions charge super low interest rates. For instance, there are those that offer payday loans with a 27% annual interest rate. One can check how much a credit union loan would cost by using the online calculator at the official website of the Association of British Credit Unions.

The loans from these firms come with no additional fees, no hidden charges, and absolutely no penalty for early repayments of loan.

Bank Overdrafts

Those that have a bank account can agree to get an overdraft. Bank overdrafts can be for a fixed amount made on a specific time frame, for instance a £400 loan may be repaid over 6 months, or if you have been provided a set limit on a continuing manner. Hence, you will be charged an interest everyday on the amount you have taken as overdraft. This is basically cheaper than a payday loan. There are even some banks that allow 0% interest on overdrafts for a limited time, which enables borrowers some time to sort out their finances. Remember however, that an unauthorized overdraft can be very expensive, avoid these at all costs or have problems down the road.