January 23, 2023
Main Street Monday – Small Businesses Spending 12% Less on Capital Expenditures
“The continuing inflationary environment underscores the need for careful cash flow management in both expenditures and revenues. Cash outflows need to be well-timed to match cash inflows from customer revenues. Small businesses accomplished this in 2022 by decreasing the average amount of each expenditure transaction while increasing the number of such transactions to preserve overall activity levels,” says Biz2Credit’s CEO, Rohit Arora.
These are the statistics about small business cash flow management:
• The average revenue small businesses earned per transaction near the end of 2022 was $948. This is a drop from the almost $1,000 average revenue per transaction seen at the beginning of 2022, but it is almost $200 higher than the pandemic low of $769 per transaction.
• In 2022, the monthly average expenditure for small businesses was just below $10,900, a 5% drop from $11,400.
• Small businesses reduced the amount of money spent per transaction by 12% in 2022, but they increased the number of transactions by 9%.
Implications for small businesses in 2023 are outlined in this report. Small businesses must practice cautious cash flow management to ensure cash outflows match projected cash inflows. It is critical that businesses continue ongoing revenue management as businesses and consumers face inflation. Lastly, small businesses should assess whether operations will require additional financing and whether their cash flow can support borrowing.
“Entrepreneurs are struggling to prioritize costs and manage cash flow,” says Charles “Tee” Rowe, President and CEO of America SBDC. “With the current volatile economy, we encourage all small businesses to visit their local Small Business Development Center (SBDC) for guidance on creating a manageable path forward.”