Small businesses should seek advice on managing cash flow and avoid relying on one major contract for the majority of their financing if they are to avoid being hit hard when finances are bad, according to the Federation of Small Businesses (FSB).

Britain's largest trade association for smaller businesses and self-employed individuals also noted that rent is one of the largest expenses for smaller firms and can become problematic to pay if cash flow tightens or business is lost.

Matthew Knowles, a spokesman for the Federation said: "This is where good financial planning and not relying on one major contract for the majority of the firm's money is important. Seeking advice on how best to manage cash flow when times are good ensures that when they are not so good, the business is insulated from the worst of it.

"The old adage about 'fail to prepare, prepare to fail' is very apt in this regard."

He also warned small businesses to be aware of everything that they are responsible for if sharing a property with other businesses, so that they can plan for the darker days or arrange commercial insurance as appropriate.

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