February 27, 2019

By Bob Coleman
Editor, C-Suite Wednesday

C-Suite Wednesday — Quickbooks Says a Third of Small Businesses Can’t Make Payroll, Pay Bills

The study found that the majority of small businesses around the world (61%) struggle with cash flow, and nearly a third (32%) are unable to either pay vendors, pay back pending loans, or pay themselves or their employees due to cash flow issues.

69% of small business owners say they have been kept up at night by ongoing concerns about their cash flow status.

Many small companies are operating on margins so thin that frequent lost opportunities will put them on the path to closing shop. 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.

Additionally, more than half of U.S. (52%) and UK (51%) small business owners’ companies have lost $10,000 or more by foregoing a project or sales specifically due to issues created by insufficient cash flow. This is also true for half of Australian small businesses (50%), 41% of Canadian small businesses, 23% of Indian small businesses.

Additionally, the inability to pay vendors, loans or employees – a situation encountered by a third of small businesses due to insufficient cash flow – damages the very relationships that small businesses and the self-employed depend on to succeed. In fact, labor costs, like paying employees or contractors, are often the single largest expense for small businesses, and none can afford to alienate employees or have high turnover rates. Among those who have had cash flow issues, more than 2 in 5 (43%) small business owners frequently have been at risk of not being able to pay their employees by payday.

For many small businesses and self-employed workers who struggle with cash flow, the problem isn’t that they don’t have funds in the pipeline – it’s that they don’t have the funds readily available for real-time expenses. One third (33%) of U.S. small business owners estimate their company currently has more than $20,000 in outstanding receivables, and the average U.S. small business has $53,399 in outstanding receivables.