Firm warns VAT hike could lead to cash flow woes

Dec 14 2010 by Henryk Zientek, Huddersfield Daily Examiner

THE New Year hike in VAT could provide the biggest cash flow worry for Kirklees firms, it is claimed.

Experts at Aldermore Invoice Finance, warned that the VAT hike – rather than a lack of sales – would prolong and intensify traditional seasonal cashflow woes, compounding the impact of large stock uptakes, extra staffing costs, holidays and unpredictable weather.

Retailers and “consumer-facing” businesses were expected to be the worst-hit along with others in their supply chain, such as manufacturers and distribution networks.

Aldermore said the first quarter of 2011 would be a make-or-break period for small companies – with a likely increase in business failures in Yorkshire.

Aldermore said SMEs that planned ahead and put appropriate funding facilities in place will be well-equipped to avoid the post-Christmas slump.

With total insolvencies falling by 20% in England and Wales, companies had benefited from greater awareness of cashflow issues as well as a recovering economy.

Dave Jones, senior regional managing director at Aldermore Invoice Finance, said: “Businesses in Yorkshire need to speak with their lenders early to prepare them for any potential risk and discuss possible solutions for flexible finance.

“It’s vital that businesses recognise the danger signs of trouble, including lengthening payment terms with customers, growing attention from their banks and a backlog of stock and put in place any appropriate flexible finance products.”