According to finance company IGF, small businesses in the United Kingdom face increased financial pressures during the summer months. The commercial finance company also warn that this increased pressure faced due to cash flow problems could lead to the closure of a business.
Cash flow problems could occur for a variety of reasons, including employees and company directors taking their annual leave during the summer months. Time off or annual holiday entitlement is usually taken during the summer months can lead to payments not being made in a timely manner when clerical or managerial staff are absent. The managing director at IGF, Tracy Ewen warns:
“The summer period right up to the first weeks of September are often a critical time for small businesses.”
As Ewen points out, the finance department of a business dealing with invoice payments and signing of cheques and financial documents could fall behind with administration, leading to the position of cash flow becoming vulnerable. A business experiencing cash flow difficulties will usually resort to a business overdraft facility or a company credit card, both of which are expensive options and will lead to further financial difficulties in the long term.
Financial planning is advised for a small business, with an accountant preparing a financial forecast to plan for difficult periods during the year when cash flow may be slower than usual. As the problem appears to get worse each year this may be a contributing factor to the failure of some businesses, according to IGF.
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