Comment: Bleak ONS cash flow stats just the tip of the iceberg; “reality is even worse”

The ONS issued new statistics today revealing that nearly half of UK firms have less than six months’ cash reserves in the bank. Cash flow expert and founder of Float, Colin Hewitt, believes that the financial reality behind the headlines is even worse, as many businesses have even less of a financial safety net.

He said: “As bleak as these statistics may be, the reality is even worse. The number of businesses without six months’ cash reserves is just the tip of the iceberg – for most it’s a matter of weeks, not months.

“Around one in 20 business reported having absolutely no cash reserves, and I wonder if the real number may be even higher. According to the ONS, a further quarter of businesses don’t know how much money they have in the bank at all, which is a dangerous position for any business to be in at any time, let alone now.

“The unfortunate truth is that the vast majority of businesses operate without any visibility of their future cash position. You can understand why some businesses don’t have extensive cash reserves but there’s no excuse for not knowing in the digital banking and cloud accounting age. It’s no wonder so many business owners are kept awake by cash flow issues – which was the case long before the COVID-19 pandemic.

“The pandemic has debunked the myth that cash flow forecasts are only for struggling businesses or businesses that expect hard times ahead of them. Every business needs a view of this financial data at all times to help them understand the future and be able to see what’s coming in enough time to help them contingency plan. It’s the businesses that can move quickly that will survive and bounce back.”