RSM: Scottish businesses could improve cashflow through credit score improvements
The combination of Brexit uncertainty, lack of investment and stockpiling is putting increasing pressure on cash, but Scottish businesses could unlock access to credit through improving credit scores - counterbalancing this burden, accountancy firm RSM has said.
Reviewing and improving credit scores could increase recommended credit limits by over £100,000, improving overall access to trade credit by millions according to RSM’s credit score improvement experts.
On average middle market businesses have seen an increase in recommended credit limits by circa £147,000; however, some have been in excess of £5m.
Unlocking access to credit could help businesses’ cash flow in an uncertain trading environment to manage short-term costs or invest in stock, inventory or equipment.
Alistair Dickson, restructuring partner at RSM, said: “The latest GDP figures show that business investment has now shrunk for the last four consecutive quarters, and whilst Gross Capital Formation has fallen slightly in the last quarter, in the last 12 months it has risen overall by 0.6 per cent, largely driven by increased stockpiling.
“These trends and the overall economic uncertainty surrounding Brexit may well point to potential cash shortages for Scottish businesses; and ultimately a requirement to actively manage working capital or approach lenders cap in hand.
“The increased pressure on overdrafts and other working capital facilities, at least in the short term, and any downturn in trade or sales if businesses experience a hiatus following a hard Brexit could be catastrophic; and lenders are stepping up their preparations for this eventuality.
“Businesses with any inkling of a future cashflow problem need to review short term financial models with several scenarios to understand if there could be a shortfall. If so, businesses could take professional advice to actively plan their funding structure and manage their credit score to help improve recommended credit limits before proactively approaching lenders.”