Insights and Strategies for Mastering Small Business Cash Flow Struggles

Is Everything Okay?

Xero is added again.

The software giant has again produced a report in which Xero converts data into information and insights.

The latest report talks about small business cash flow struggles.

No surprises here.

The report states that small business owners are dipping into their savings to keep their business afloat.

No surprises here either.

The report finds that over 25% of small businesses in Australia have used personal savings to keep their businesses afloat with another 30% of small business owners saying they have been unable to pay themselves.

Some would argue that there is really no surprise here either.

Let’s get real

It’s just what you do when you are a small business owner, right? When you start to put firm numbers and percentages against what might be considered historical anecdotal throw aways, we start to realise and feel the significance of the issue.

Late payments are the major cause which has impacted the whole supply chain process and creates that domino effect.

Great Advice

You might recall my comments DURING COVID LOCKDOWN about the brilliant advice people were pushing out about how cash is king so tell your creditors they will be getting paid, but it will be late, oh and while you’re at it, get onto your debtors and don’t accept not being paid on time! Think about this advice for a minute.

What’s the tip?

Unsurprisingly, not being paid on time contributes to cash flow stress.

How have small business owners managed this puzzle?

The report also talks about the strategies that business owners have engaged in to avoid the cash flow crunch, which includes scheduling payments, setting up direct debits and using e-Invoicing. Only 38% of business owners are using accounting software to help track cash flows with construction and trade businesses being the sectors with the lowest take up of cash flow forecasting tools.

The report says that many small businesses have negotiated payment arrangements with suppliers (over 40%) and 40% have stalled revenue experiences as a result. This is where the data becomes real.

The report reveals that over 45% of small businesses admit they are worried about their personal financial future and nearly half (almost 50%) are concerned about their business’s financial future. Which also coincides with the fact that small businesses believe that the businesses will not achieve their financial goals (about 50%) and 60% don’t feel confident about their ability to absorb any financial shock.

60% of businesses surveyed have experienced cash flow issues with 14% experiencing significant challenges and 30% of small business owners check their cash flows on a daily basis.

What’s Important to Me

What’s important to me coming out of all this information is the financial and emotional wellbeing of small business owners. 57% of small business owners are feeling stressed, 50% are troubled by anxiety and at least 48% are having difficulty in getting to sleep.

Sell me the dream

Based on the information in Xero’s latest report, sell me the dream of being a small business owner.

Is it worth the effort?

Look Out

Be proactive.

Keep an eye out for friends and family who are small business owners to see whether there has been some change in behaviors lately as this could be an indicator of a sliding emotional wellbeing slope.

Don’t be afraid to ask the simple question – is everything okay?

My tips for Cash Flow Struggles

Monitor, monitor, monitor. Keep your head down but your eyes up!

Communication and relationships with stakeholders are fundamental.

Build communication channels; open, honest, and credible.

Relationships built on trust, confidence and reliability will help you get through.