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Five ways SMEs can boost their cash flow this summer

Five ways SMEs can boost their cash flow this summer


If facing up to the potential prospect of large tax rises isn’t worrying enough for SMEs, over half are being prevented from accessing billions of pounds through unpaid invoices. According to *research published by Zurich in April 2017, 52 per cent of Britain’s small-and-medium sized enterprises are owed approximately £44.6 billion in late payments, placing a major strain on their available working capital.

 The findings highlight that almost two-thirds (64 per cent) of UK SMEs typically encounter delays of more than one month in payments which are already over 30 days overdue. 21 per cent admitted they are owed more than £25,000 while almost one in ten are owed in excess of £100,000, leading to significant funding gaps. 

With the issue of late payments showing few signs of abating, Wesleyan Bank highlights five ways SMEs can protect their cash flow this summer and increase efficiency.

Get on top of business expenses - many SMEs still rely on spreadsheets and inefficient manual processes to manage their business **expenses, collectively costing them approximately £8.72 billion each year in lost productivity. Investing in automated systems and cloud-based solutions can make it easier to track, control and report expenses, saving time and dramatically cutting administration fees. 

In addition, companies can miss out on tax deductible advantages by failing to claim for trading expenses that are incurred wholly and exclusively for business purposes. These may include equipment, telephone related communication, business travel, training, subscriptions and accountancy fees.

Claim for Capital Allowances - commercial property-owning businesses can claim a valuable source of tax relief for certain capital expenditure, known as ‘Capital Allowances’. Qualifying items include specialist plant and machinery, heating and air conditioning, security and communication systems and IT related investments. Costs associated with building refurbishments, extensions and other installations may also qualify for capital allowances. 

In addition, the Annual Investment Allowance offers tax relief at 100 per cent of qualifying expenditure. This scheme enables businesses to write off the combined cost of certain assets against profits in the year of purchase, up to £200,000.

Seek specialist financial support - SMEs can prevent late payments from causing a cash flow crisis by paying for their tax liabilities over time. Specialist external finance providers, such as Wesleyan Bank, provide bespoke funding solutions which allow businesses to spread the cost of their VAT bills (over three to 12 months) and self-assessment tax returns (over six or 12 months).

This enables businesses to gain greater predictability over their expenditure and more easily manage peaks and troughs, without compromising their existing banking lines. Vital working capital reserves can then be used to bolster other important areas of a business, from investing in new equipment and modern technology so SMEs can compete on a level playing field with larger firms.

 Leverage R&D tax credits - Research & Development (R&D) tax relief, introduced by the Government in 2000, could save SMEs substantial costs towards strengthening their competitive position yet only a handful are presently taking advantage. The scheme enables companies to reduce their tax bill or claim payable cash credits as a proportion of their qualifying R&D expenditure.

Registered businesses investing to enhance new products and services through technological advancements, even if the outcome is uncertain, have a good chance of qualifying for R&D tax relief. Businesses are not restricted by their industry sector and it is estimated that £1 billion in tax credits is currently going unclaimed every year. Is your firm missing out?

Take advantage of the new Apprenticeship Levy - launched in April 2017, the Apprenticeship Levy allows businesses to hire apprentices and upskill existing employees at a fraction of the current cost. Firms with an annual payroll bill of less than £3 million (which applies to 98% of companies in England) must contribute 10 per cent towards the cost of funding apprenticeships and the Government will contribute the remaining 90 per cent, to include training and recruitment fees.

Larger firms with a salary bill over £3 million must pay into the Apprenticeship Levy but will receive an allowance of £15,000 per annum to offset against their levy payment and apprentice training costs.

Wesleyan Bank offers an extensive range of short-term working capital and long-term funding solutions to enable SMEs to boost their cash flow and utilise working capital to invest towards maximising their future growth and profitability.

*Zurich SME Risk Index, April 2017
www.zurich.co.uk/en/about-us/media-centre/general-insurance-news/2017/smes-owed-more-than-45bn-in-late-payments

** Soldo: UK SMEs lose £8.2bn every year managing company expenses, February 2017 www.bmmagazine.co.uk/news/uk-smes-lose-managing-company-expenses/

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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