The latest research by BDO has shown that rates of cash generation among small and medium sized firms in the UK remained low before the coronavirus hit – leaving them facing cashflow crises in the wake of it.

This study found that big companies with turnovers that hit over £3bn a year have been able to maintain cashflow by converting their sales into free money, with their average rate for this being 9.6%. The outlook is much less bright for small and medium sized businesses though, with their average sales-to-cash conversion rate being just 2.5%, leaving them facing real worries as the economic effects of the pandemic start to bite.

Cashflow generation has been low for small and medium sized firms for several years now, having dropped from an average rate of 3.3% before the Brexit referendum.

Speaking to Accountancy Daily, Mark Lamb from BDO said:

“The impact of COVID-19 has triggered a cashflow crisis for a huge number of businesses. The fact that free cash generation was relatively low for so many businesses in the run-up to the outbreak is a worrying sign.”

He went on to add that these firms would need to boost cashflow if they were to come through the economic downturn and that improving it – by calling in overdue payments or exploiting tax options – would be necessary.

Firms faced with this may look to a small business accountant in South Yorkshire or any other area of the UK who can help them generate cashflow by finding useful tax reliefs.