While for many businesses the summer is a peak period of activity, for others it presents a real challenge as activity dips and cashflow comes under pressure. A new survey suggests that SMEs need to be extra vigilant in managing their working capital over the sunny months.
Hitachi Capital Invoice Finance issued some research this week that showed that SMEs are more likely to seek additional funding during the month of July than at most other times of the year.
According to Hitachi, the summer holiday season marks a time when many SMEs are feeling the strain due to a depleted workforce, which can have a detrimental effect on productivity and business performance.
‘More pressure during summer’
“Trading activity might slow down and invoice payments might take longer than usual to materialise, particularly if key people are away on holiday,” says John Atkinson, managing director at Hitachi Capital Invoice Finance. “To help bridge the funding gap, our data shows that SMEs are more likely to seek cash flow finance.”
For businesses that see a slackening off of income and activity over summer, the stress on working capital can be severe. Certainly, if SMEs have failed to keep a close eye on working capital management throughout the year, they may be tempted to dip into cash reserves that have been set aside to pay their tax return when it becomes due at the end of January each year. “This is never a wise thing to do and is simply storing up cash flow problems for the future,” says Atkinson.
“There are other things that businesses can do to alleviate pressure on cash flow during the summer season. Improved business forecasting, for example, could enable the business to plan ahead for any dip in trading activity and it may also be wise to delay non-essential expenditure during periods when cash flow is more likely to come under pressure. If necessary, seasonal incentives could also be offered to encourage debtors to make prompt payments.”