The recently released QuickBooks State of Cash Flow Report revealed that 60% of small businesses constantly deal with tight cash flows. In addition, 32% of overall small business owners fail to meet financial obligations or payment terms for employees, creditors, and suppliers to name a few.
What is the primary reason for the cash flow snags?
The mismatch in receivables and payables schedule is creating the snags. The problem is not the lack of funds but the availability. About a third (33%) of the total respondents of the report survey said that they had $20,000 or more in outstanding receivables.
The delay in payment processing is the biggest headache for 66% of the entrepreneurs. The other 34% lament late customer payments as they have to wait an average of 29 days before receiving actual payments.
“To combat cash flow issues, many small business owners turn to loans. In fact, 61% of respondents said they have applied for a loan for their business. Sole proprietors–entrepreneurs with no employees–are less likely to apply for loans than companies with employees: 71% of sole proprietors have never applied for a business-related loan, compared to 39% of businesses with 1-49 employees.”
On average, the outstanding receivables of a small business in the U.S. amounts to $53,399.