A fifth of small businesses fell into their overdraft last year

Small businesses in the UK struggled to manage their cash flow last year, with one in five falling into their overdraft, found research by accounting software Fluidly.

Of the 19,799 businesses surveyed, those having to use their overdrafts rose from 13.9% in March 2019 to 17.8% in January 2020. Plymouth came out top as the area where most small companies had to resort to their overdraft to survive, with 35.7% doing so, followed closely by Southampton (34.3%), Peterborough (32.8%), Shrewsbury (31.1%) and Preston (29.7%). 

Other areas affected included Stoke-on-Trent (27.4%), Manchester (26.5%), Bristol (26.4%), Milton Keynes (26.1%) and York (26%). Reasons cited for this reliance on overdrafts included late payments, the impact of Brexit and continuing economic uncertainty. 

Fluidly chart

Image: Fluidly chart

“Business owners are no doubt being caused sleepless nights by concerns around making payroll, paying supplier or tax bills, and chasing late payments, let alone whether they can invest in growth,” said Caroline Plumb, founder and chief executive of Fluidly. 

“An estimated 50,000 businesses go under each year due to late payments, costing the economy £2.5bn. How many of these ‘failures’ are avoidable? If the rising number of businesses with no cash in the bank goes unchecked, tens of thousands more will go under.”

Recent research from the Federation of Small Businesses also found that 37% of finance applications by small businesses were being driven by cash flow concerns, while a further 40% of owners said that the funding options available to them were "unaffordable”. 

What do you make of this story? Comment below. 

You’ll never guess how much no-shows cost UK beauty and hair salons last year