You’re in bed and you finish reading your book and turn out the light. But instead of falling asleep you start to think about work. You go through the checklist of things you have to do tomorrow, and then you remember that it’s getting close to the 10th of the month and you know that you have to get your bills paid, plus you have a payroll coming up in the next week. You try to remember how much you have in your bank account and. . .oh boy it’s going to be tight. You’re thinking, “If we don’t get a few checks in the mail by next week we might have to push a couple of payments back.” And then you toss and turn most of the night thinking about business. Sound familiar???
You’re not alone; unfortunately it happens to many small business owners. Intuit Quickbooks conducted a survey of small business owners in 2019 – State Of Small Business Cash Flow - and found that a majority of them lose sleep worrying about their cash flow issues. (If you want to look at the results for yourself here is the link, https://www.slideshare.net/IntuitInc/the-state-of-small-business-cash-flow/1 )
Here are a few of their findings:
1. Two out of three owners report that cash flow issues keep them up at night.
2. Sixty-one percent of respondents reported that they regularly grapple with cash flow issues.
3. Among those that struggle with cash flow issues, 32% report that they, at times, have not been able to pay their vendors and loans or make payroll.
4. Owners report losing projects or sales specifically due to cash flow issues.
5. U.S. small business owners average $53,399 in outstanding receivables.
6. It takes an average of 29 days to get paid on account. (Other surveys suggest this number is much higher, closer to 50 days on average.)
Cash flow is an issue for many small business owners, especially for those that live in rural communities, where extending credit to customers is still customary.
However, there are ways to mitigate cash flow issues, here are a few ideas:
1. Invoice customers as soon as possible after the sale.
2. Offer a cash discount to customers if they pay immediately.
3. Clearly indicate on your invoices/statements your payment terms.
4. Charge a finance charge for late payments; 1.5%/month is a fairly standard rate.
5. Stay on top of your receivables and contact late paying customers.
6. Be willing to cut off customers that regularly pay their bills late.
7. Work with your vendors to set up favorable payment terms.
8. Actively manage inventories, being careful to not overstock items.
9. Manage your purchases, monitoring your cash so you don’t get in a bind.
You're not alone laying awake in the middle of the night thinking about your company's cash flow issues, but there are steps that you can take to manage the impact. You can also contact us to learn more about our receivables financing and management services. Helping small business owners with cash flow issues is our business. It’s what we do!