One in four UK businesses struggling to pay debts Baker Tilly said a large proportion of firms were suffering "very serious cash flow issues." It found that one in every 39 companies was at risk of needing a major restructuring or insolvency process within the next 12 months. Baker Tilly's Matt Haw said: "For many businesses, after almost four years of recession and difficult banking conditions, working capital is scarce, which will make it difficult to fund any growth opportunities." Access to capital will be crucial for companies when an economic recovery takes off. "Significant numbers of businesses fail on their way out of a recession due to cash-flow constraints," he added. As things very slowly start to improve, there's a real risk of overtrading. While many companies are struggling with debts and falling profits, insolvency levels are surprisingly low. The overall number of administrations has declined every quarter this year. Insolvency trade body R3 has estimated there are 160,000 "zombie companies" in the UK - firms able to pay the interest on their debts but not the debt itself. Tips for struggling businesses Forecast your finances Develop a clear plan for forecasting your finances and focus on the factors likely to impact the business tomorrow, such as seasonal sales variations, delays in new orders, capital expenditure and pricing issues. Assess how these may alter future cash requirements by monitoring and refining your plan on a regular basis. Explore opportunities to increase working capital Be prepared to review any underutilised assets as a way of raising extra cash. Also, balance cost savings and sweat your assets. Ramp up your credit control Understand your customers" payment system and ensure invoices are issued promptly and cash collected more quickly. Ensure all paperwork is in order and agreed by debtors. Check the credit history of any new customers and assess their ability to pay invoices on time. Agree acceptable credit terms Take time to assess the credit terms you have with your trade creditors. Often agreeing terms is a flexible process. However, cash flow problems can be made worse when these terms are over-stretched or breached. Severe late payment to creditors can impact your overall credit score and future relationship with them and others. Stick to agreed debt/loan payment schedules While HMRC Time To Pay arrangements can prove a vital lifeline in certain circumstances, tax debt payment schedules should not be taken for granted. While empathetic,HMRC will expect to see a proactive and open approach. Likewise, interest on late repayment of agreed bank loan terms can also deplete much required working capital. Review stock levels Managing your stock levels and purchasing strategy is vital. Have you reviewed stock levels to make sure you only hold the minimum level necessary for efficient operation? Old and obsolete stock is an additional cost and a reduction in cash available to the business. Maximise value from IT systems Investing in or fully utilising IT might not seem a priority, but the benefits can quickly recoup the initial expenditure by improving operational efficiency and delivering better quality management information which can be acted upon in a timely manner. Effective communication Keep all your key stakeholders - including credit insurers - on board by providing them with timely, accurate information. Seeking support and advice early can often prevent a problem spiralling. Source: Baker Tilly