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A Third of Small Businesses Struggle to Pay Bills, Make Payroll

Thursday Feb 7th 2019 by Jeff Goldman

Sixty-nine percent of small business owners say they've lost sleep due to cash flow worries, according to a recent survey.

Sixty-one percent of small businesses worldwide struggle with cash flow, and 32 percent are unable to pay vendors, repay loans, or pay themselves or their employees as a result, a recent Intuit survey found.

The survey of 3,000 small business owners with 0-1,000 employees in the U.S., U.K., Australia, Canada and India also found that 69 percent of respondents said they've been kept up at night by ongoing concerns about their cash flow status.

Among those who have faced cash flow issues, 43 percent of small businesses owners say they've frequently been at risk of not being able to pay their employees on time.

The Cash Flow Crunch

"Every day, small business owners fight to deliver amazing products and services for their customers, but – with 50 percent of small businesses going out of business within five years of opening their doors – the odds are stacked against them," Intuit general manager Alex Chriss said in a statement. "The top reason for failure is the cash flow crunch and lack of flexible options."

More than half of U.S. (52 percent) and U.K. (51 percent) small businesses have lost $10,000 or more by missing out on projects or sales due to insufficient cash flow. The same is true of 50 percent of Australian small businesses, 41 percent of Canadian small businesses, and 23 percent of Indian small businesses.

On average, U.S. small business owners have lost $43,394 by missing out on projects or sales due to issues caused by insufficient cash flow.

"Cash flow, at least in the printing business, is very difficult," DPI owner and CEO Sanjay Sakhuja said in a statement. "You have to finance projects, payroll, materials, utilities, fixed overhead yourself in order to get the job. And of course, there's a credit risk. Any time you offer somebody credit, there's a chance they might not pay you. And that is a constant challenge for us."

Waiting for Payment

Fifty-three percent of small businesses invoice, while 47 percent require payment in advance. Thirty-one percent said it takes more than 30 days to get paid by customers, clients, vendors or banks – and 33 percent of U.S. small business owners said their company currently has more than $20,000 in outstanding receivables. In some cases, that number is far higher – the average U.S. small business has $53,999 in outstanding receivables.

"For us, staying at the top of the market means continually investing in new product development, but this requires cash," GoScope CEO Kyle Scarola said in a statement. "Delays in payments – for example, having to wait to receive a check via mail and then deposit it into our account – can result in us not having the cash we need for days or even weeks."

Two thirds of respondents said the time it takes the funds to process after receiving a payment has the largest impact on their company's cash flow, while one third say not getting paid on time by customers or clients has the greatest impact.

Sixty-one percent of U.S. small business owners have applied for a loan for their business. Among those who haven't applied for a loan, reasons for not having done so including the fact that they didn't think they would need it (55 percent), interest rates were too high (29 percent), they didn't want to make payments (23 percent), and they didn't think they would be approved (19 percent).

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