Allianz Trade: Corporate Cash Flow Improves Amid Rising Insolvency Risks

Allianz Trade, a global leader in trade credit insurance, has released an analysis highlighting the critical role of cash flow management amidst growing economic uncertainty. The company predicts a significant rise in corporate insolvencies in Italy for 2023, reaching an estimated 10,900 cases, aligning with pre-COVID-19 levels. This represents a 36% increase compared to 2022.

The report defines cash flow as the liquidity generated or consumed by a company over a specific period, emphasizing its distinction from accounting profit. It warns that even profitable companies can face insolvency if their cash flow is disrupted, particularly due to delayed customer payments. Businesses extending credit are identified as being at higher risk.

Allianz Trade notes that only 51% of small and medium-sized enterprises (SMEs) report positive cash flow, and one in seven companies struggle with liquidity to the extent of delaying salary payments. This underscores the persistent challenges many businesses face in managing their cash effectively.

The analysis further points to the fragility of new ventures, with one in four entrepreneurs forced to close within their first year due to weak or inconsistent cash flow. Allianz Trade offers a guide for SMEs on protecting their cash flow, covering fundamental management principles and common pitfalls, as a crucial step in ensuring business survival and growth.