Why Cash Flow is a Bigger Issue for SMB Clients

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When you talk to small businesses and the self-employed, you hear ‘cashflow’ and struggles related to it more than anything – Rania Succar, QB Capital segment leader

The impact that negative cash flow has on your small business and self-employed clients is profound as many are operating on margins so thin that frequent lost opportunities will put them on the path to closing shop.

In fact, on average, U.S. small business owners are losing $43,394 annually by foregoing a project or sales due to issues created by insufficient cash flow, according to a new global cash flow study from Intuit. This is both an alarm and a potential call-to-arms for accounting professionals to better assist their small business and self-employed clients.

Intuit Inc. today released the findings of “The State of Small Business Cash Flow,” a global study focused on the behaviors, attitudes and status of cash flow challenges experienced by small businesses and the self-employed. The research found that 61 percent of small businesses around the world struggle with cash flow and 32 percent are unable to either pay vendors, pay back pending loans, pay themselves or their employees due to cash flow issues.

This is true in spite of recent tax cuts, regulatory rollbacks and other stimulus policies that have benefitted small businesses, with 42 percent saying they’ve experienced cash flow issues in the last year. Furthermore, 69 percent of small business owners responded that they have been kept up at night by ongoing concerns about their cash flow status.

Here are some additional key findings in the research:

  • 52 percent of US and of 51 percent of UK small businesses have lost $10,000 or more by foregoing a project or sales specifically due to issues created by insufficient cash flow
  • 43 percent of small business owners frequently have been at risk of not being able to pay their employees by payday
  • the average U.S. small business has $53,399 in outstanding receivables
  • 66 percent of small business owners report that the time it takes the money to process after receiving a payment has the largest impact on their company’s cash flow
  • 31 percent of small businesses estimate it takes more than 30 days to get paid, by customers, clients, vendors or banks. During this month of lag, however, businesses still need to cover expenses including overhead and labor costs – thus creating cash flow woes

The State of Small Business Cash Flow was conducted by Wakefield Research in Fall 2018 and surveyed 3,000 small business owners of companies with 0-100 employees in the U.S., UK, Australia, Canada and India.

At last year’s QuickBooks Connect event, hosted by Intuit, we caught up with Rania as well as Laurent Sellier, VP and Business Leader, QuickBooks Online Payroll about the issue of cash flow facing small and self-employed businesses:

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