Recession - cash flow pain worsens

I recently wrote of the imperative of cash flow for small- to medium-sized enterprises - into which a majority of PR companies, and many of their clients, fall.

Ian Monk
Ian Monk

The subject remains of critical importance in what is now officially a recession. Last week, I heard of two previously viable PR companies, plus a former client, whose businesses closed because of cash flow problems caused principally by late payments.

Last week too, the major political parties, largely through a series of PR-controlled leaks, began setting out their pledges to tackle the problem.

It was fascinating to note the Daily Mail's 'Fair Deal For Small Firms' campaign was able to deliver a victory a day from its launch. For those marvelling at such power, the answer might be more arcane than they imagine. Like many circulation-boosting newspaper campaigns, the Mail's would have been launched with the benefit of some precise steers on the current content and timing of political parties' thinking. The newspaper calls for action and the next day the Government or opposition announces it is considering it/refusing to rule it out. Bingo - a campaign 'victory'.

Campaigns aside, the depressing fact about much of the action being mooted to help small businesses is that it seems more calculated to push businesses deeper into debt than to boost incoming revenues.

Proposed measures such as the six-month deferral of VAT and NI payments simply extend lines of credit against mounting debts. Instead of addressing the real problems of a shortage of incoming revenues, they encourage future debt. Perversely, they are also likely to induce recalcitrant payers to delay even further. After all, some may argue, even the Government has relented on its payment terms, so why shouldn't PR companies give clients another couple of months' grace?

Instead of putting tax on the never-never, surely now is the time for the Government to penalise late payment through regulation or legislation? The focus should be on speeding up the inflow of owed cash, not offering temporary relief on ultimately inescapable outgoings.

Ian Monk is founder of Ian Monk Associates and a former executive at the Daily Mail and The Sun.

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