Administration February 9, 2003

Cash Flow Crimps Small Businesses

September 26, 2001 (PLANSPONSOR.com) - Cash flow is a continuous problem for one in five small-business owners, according to a new study by Wells Fargo and the National Federation of Independent Business (NFIB).
Reported by

Results of the National Small Business Poll, The Cash Flow Problem, also show that nearly half of those surveyed also suffer some type of cash flow problem, but less frequently than those with a continuing problem.

Only a third of the business owners polled never experience cash flow difficulties, and larger small firms are as likely to encounter cash flow problems, if not more so, as the smallest.

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Money Matters

The chief reasons the sample gave for their cash flow problems is:

  • difficulty they encounter collecting money due them, cited by 30%,
  • seasonality, listed by 23%,
  • unexpected variations in sales, cited by 15%,
  • while 13% said weak sales

Problem Solving

Small-business owners with a continuing or a common cash flow problem are more than twice as likely to cite “borrowing” as their most important step as are those who have an “occasional” problem.

When asked about their most common responses to a cash flow problem, only 10% of business owners who experience cash flow problems use one measure exclusively to solve the problem, in fact, when faced with a cash flow problem:

  • almost three-quarters of the sample said that they try harder to collect outstanding debts,
  • just over 70% said that they adjust scheduled purchases, and
  • a little over 63% draw on personal resources

Methodology

The sample consisted of 750 small-business owners and was stratified to allow independent examination of businesses with one to nine employees, 10 to 19 employees, and 20 to 249 employees.

– Camilla Klein      editors@plansponsor.com

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