The number of firms experiencing cash flow problems remained low during the second half of 2014, according to a report from Lloyds bank.

The Business in Britain report included a survey of 1,500 small and medium-sized businesses, which revealed that 17% had experienced difficulty with cash flow. The figure is down from 35% in 2013.

Businesses in Gloucestershire, Oxfordshire and the South Midlands were the most likely to be experiencing cash flow problems, with 23% experiencing difficulties.

Businesses in Scotland were the least likely to be suffering, with only 8% having cash flow problems.

Donald Kerr, Managing Director of Lloyds Bank Global Transaction Banking, said: “Cash flow ought to be the most important focus for any business, so the fact that relatively few have got concerns in this area is very positive.

“As the economy recovers, one of the biggest risks to businesses – especially smaller businesses - is the threat of overtrading. This is where businesses take on more work than they can afford to deliver, creating a cash flow crunch.

“The fact that this does not appear to be happening, and that the number of businesses with cash flow worries has in fact stabilised over the past 12 months is also encouraging, especially amid concerns about global growth and weakening business confidence.”

Over half of businesses (57%) said the reason for their cash flow difficulties was late payments. A fall in demand was the second most likely reason (37%).

Mr Kerr said: “Late payment continues to be a problem for many businesses. Widespread adoption of the Prompt Payment Code would help, but businesses also need to carry out thorough credit checks on customers and set out clear payment terms at the outset of any relationship.”

Please contact us for more advice or information about cash flow difficulties, late payment or any aspect of debt recovery.