Pictured: Chris Key

Whilst many companies are struggling with cash flow issues a good number of smaller businesses - together with major corporations - have accumulated significant cash piles, according to corporate finance partner Chris Key at the Birmingham office of Haines Watts.

"We seem to have a polarisation when it comes to company cash: the haves and have-nots and whilst there are many have-nots, a number of companies are sitting on significant cash reserves," said Mr Key.

Famously, at the one extreme, Apple has more cash to spend than that of the United States government. The July figures from the US Treasury Department revealed that the US has an operating cash balance of $73.7bn - contrasting with $76.4bn of cash reserves in Apple's most recent financial results.

"Apple is, of course, the exception and not the rule but there is actually a significant cash pile being held by major corporations in particular but also, at the other end, family owned businesses and SMEs," said Mr Key.

"It is not surprising that many company bosses are reluctant to invest significant levels in capital equipment when there is uncertainty in the economy. Far better, they reckon, to keep hold of it - just in case the current rainy days turn into thunder storms.

"However, it is more than likely that the cash is sitting there doing nothing - which is hardly productive for any business."

Mr Key believes that many companies are contemplating going on the acquisition trail - with takeovers already back in vogue and M & A deals being on the up.

There are opportunities out there now as larger corporates are off loading non-core subsidiaries and require cash themselves. We have seen several deals recently in the region where such sales have occurred.      

"Provided you can find the right acquisition, it is a sensible move but acquisitions are full of pitfalls and in smaller businesses in particular, have a habit of taking management's eye off the day-to-day running of the business."

Investment in research and development is, said Mr Key, an investment in the future - and with a better tax return, is potentially proving attractive.    

"Where cash is being held for a designated project, it is important to establish the timescale when funds will be needed and match their accessibility to that. This means that businesses can invest more wisely - and in areas where a greater rate of return is available. Fixed term money market deposits give a better rate than deposit accounts at banks.

"Over time, simple management of this type will give a worthwhile enhanced return," said Mr Key.

"Some businesses are also now looking at getting discounts from suppliers for earlier payment. Smaller, less cash-rich companies are welcoming the certainty of an order as well as the certainty of enhanced cash flow and may well be willing to give a discount accordingly," said Mr Key.

For more information on Haines Watts, please visit their website here: www.hwca.com