Smooth cash flow needed as public finances feel the pressure

  The importance of keeping cash flow smooth during a turbulent economy has been highlighted in comments from the British Chambers of Commerce, following the latest official figures on the state of public finances in the UK. According to ONS figures for January 2013, net borrowing in the public sector grew by £11.4bn in theRead More

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The importance of keeping cash flow smooth during a turbulent economy has been highlighted in comments from the British Chambers of Commerce, following the latest official figures on the state of public finances in the UK.

According to ONS figures for January 2013, net borrowing in the public sector grew by £11.4bn in the month, compared with a net repayment of £6.4bn in the same month of the previous year.

Receipts from income tax and VAT were up by 4%; however, corporation tax receipts fell by 13% year-on-year, and BCC chief economist David Kern points to this as a cause for concern about the state of business finances.

“The large decline in corporation tax highlights the need to support growing companies with the ability to make profit, and the lack of finance available to these companies must be urgently addressed,” he says.

One means to naturally boost the availability of business funds, rather than through any artificial means such as bank lending schemes, is simply to focus on accelerating the normal cash flow cycle.

More stringent invoicing and prompter payment of amounts owed can keep funds moving through supply chains, reduce the level of debt to which client companies are liable, and similarly ensure that supplier companies receive the funds to which they are entitled for providing goods and services.

This cannot increase the total amount of money that exists within the UK economy, but a faster and more consistent flow of funds between companies allows it to be put to better use at a time when many firms are looking for ways to make their balance books look a little healthier.

 

 

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