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Common Trends in Modern Small Business Cash Flow

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Cash flow is a problem that has been troubling small and midsize businesses (SMBs) and accountants since the dawn of time. Combine tight capital, slow cash turn-around time, and lack of planning, and it’s no surprise that this issue comes back, again and again, every month-end when the bills come in.

A 2022 survey suggested that cash flow problems are the second most significant barrier for small businesses, and one in ten states that cash flow problems are the top business barrier for them. More than half (57%) of SMBs also said it’s currently challenging to manage cash flow for the business, significantly higher than pre-pandemic (41%).

Turning towards personal credit

Almost one-third of SMB owners say they have difficulty accessing business credit and critical financial products and services. With such high barriers, as many as 70% of SMBs continue to rely on personal credit cards for business expenses or have provided a personal guarantee to access corporate credit.

While this might solve short-term needs, there are many issues with this approach in the long run. Two-thirds of SMBs that relied on personal credit faced problems such as difficult expense reconciliation, high-interest rates, and maxing out credit limits.

Combatting cash flow problems

Consequently, many SMBs and accountants look for other ways to improve cash flow. Some business owners, for instance, are considering switching their existing financial providers for lower fees, better rates, and cash incentives and rewards. On the other hand, a significant portion of businesses in the US (60%) and the UK (48%) have adopted real-time payment solutions. Real-time payment help companies to hold on to money longer and still make payments on time, removing the need to offer early payment discounts, all while reducing cash turn-around time.

Level up technology to stay ahead

From a planning and management perspective, businesses are levelling up their tech game to gain more control over their business cash flow. A Sage survey stated that 60% of respondents would spend more time on data analysis to uncover insights or trends if they could close the book faster. The good news is that many tools in the market are now providing real-time cash flow insights, and more SMBs and accountants are taking advantage of it.

ForwardAI’s recent survey discovered that 63.9% of bookkeepers and accountants use cloud-based accounting software – the highest among all surveyed industries. This isn’t surprising, as cloud-based accounting software helps bookkeepers and accountants automate their accounting processes and integrates with modern cash flow forecasting and management tools. This explains why bookkeepers and accountants are spearheading offering cash flow forecasting as a service, with almost half of all accounting firms (48.7%) providing it to their clients.

Newer technology enables SMBs and accountants to create a feasible financial plan efficiently without needing to scramble knee-deep in spreadsheets as businesses did in the old days. While many are already taking advantage of these new tools to stay competitive, SMBs and accountants who haven’t moved on will need to upgrade away from outdated processes before they get left behind.

Planning is the key to success

Cash flow management is a process that requires planning, budgeting, and forecasting. The more seriously and in-depth you plan out these practices, the easier it will be to identify potential cash flow problems before they happen. SMBs often focus on getting the job done, which is excellent for growing the business but not so great for managing cash flow. SMBs and accountants can’t afford to sit around until they need the cash – they need to plan ahead to avoid cash flow gaps.


Originally published on

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