Updated: Apr 15, 2020
Inuit Quickbooks recently released the "State of Small Business Cash Flow" Report,which surveyed 3,000 small business owners with companies from 0-100 employees in the US, UK, Australia, Canada and India. The results are arguably grim.
Of the 61% of the companies surveyed that regularly struggle with cash flow, 42% have experienced cash flow challenges within the last year leading to 32% having faced challenges paying vendors, lenders, or payroll. Also, because small business owners are operating on razor-thin margins, an average of $43,394 annually is lost because small businesses face various challenges created by insufficient cash flow, with 52% of small business owner's companies having lost a sale or project worth $10,000 or more because of insufficient cash flow.
In identifying the cause of the cash flow strains, 33% of the business owners surveyed estimate that their company has $20,000 or more in outstanding receivables; however, the average US small business actually has just under $54,000 in outstanding receivables. Also, 31% estimate that it takes more than 30 days to get paid by customers, clients, vendors or banks leading to cash flow strains that are causing 43% of small business owners to frequently be at risk of not making payroll.
For those lenders and advisors that work with small business owners, it may be prudent to deep-dive into the small business portfolio. Given the likelihood that times will get worse before they get better, even though small business credits are typically smaller, when challenges arise the total of the credits can add up.