Midddle market firms at risk warns KPMG

The latest survey from KPMG, shows there is growing concerns that many middle market companies are at risk by not managing their cash effectively.

The regular KPMG survey which canvasses the opinion of 200 companies with
turnover between £5m and £500m suggests that economic optimism has just started to wane after six months of relative calm.

For middle market firms in particular, cash is king. But 2006 has seen
pressure on the sector increase following soaring energy costs, a higher
minimum wage and a rise in interest rates.

From hauliers to manufacturers to retailers, firms are feeling the pinch. The squeeze on margins means that there has never been a more important time for middle tier companies to focus on their bottom line.

Most middle market companies believe that they are on top of
the situation when it comes to effective cash flow management.

83% of respondents felt both cost reduction and revenue growth are currently
important issues for their businesses, with cash management accounting for
just 77% of responses.

Jane Moriarty, partner in KPMG restructuring, says: “The striking thing with this survey is the number of respondents who believe they fully understand their cash management position.

“An incredible 82% of respondents believe they have effective cash flow management.

“However, from our experience, most businesses can improve their cash management processes and generate more cash from their operations.”

“Unlike multi-nationals which have access to larger resources, firms in the
middle market are more exposed when they get their cash management situation wrong.

“Our survey shows that every business decision a company makes has a
cash implication and fewer than one in five agrees with that.

“We found that over a three year period we helped our clients identify £1.4 bn of cash opportunities.”

“If additional cash could be generated now, middle-market firms could then look to put this back into the business to fund future growth.

“These findings support what we typically experience; management teams are adamant they have good cash management processes but, when challenged, cash flows can be improved dramatically.”