Many small business owners don't feel financially confident unless they have a buffer big enough to cover running costs for a year, according to new research.
A survey by Paymentsense has found that 28% of business owners say they don't feel secure unless they have enough money set aside to pay their annual running costs.
However, the study found that more than four in ten small business owners (41%) admit to having no such buffer in place; it means that as many as 2.3m UK small businesses may have no financial back-up plan.
For those businesses that do have something in reserve, the Paymentsense survey shows that the most popular back-up is cash savings - held by 59% of prepared businesses. A third (34%) said their buffer included property and nearly a quarter listed an overdraft facility (23%). Plant and machinery featured for a fifth (20%), with 17% using business credit cards.
The study also found that almost two-thirds (61%) of SME owners are in debt, with monthly repayments averaging £3,589. What's more, over half (55%) admit to deliberately paying suppliers and partners late to ease cash flow problems. More than a fifth (21%) said they do this at least once a month.
Guy Moreve, head of marketing at Paymentsense, said: "We know that feeling financially confident is critical for small business owners. Aside from helping you sleep at night, it enables accurate long-term fiscal planning for growth rather than just survival. Having a buffer is just part of the picture. Cash flow monitoring and proactive credit control are also essential. However, we'd caution against routinely delaying invoices to partners and suppliers, as it risks damaging important business relationships."