When it comes to entrepreneurial anxiety, cash flow concerns are at the top of the list of things that keep business owners up at night.
That's why cash flow and how to best manage it were hot topics at Intuit’s QuickBooks Connect conference last November, where thousands of small business owners gathered to learn from the experts--accountants, advisors and Intuit subject matter experts.
Intuit knows the SBM market as well as any company on the planet. With 5.6 million subscribers worldwide and an additional 720,000 QuickBooks self-employed subscribers, QuickBooks has used mountains of data to gain profound insights into what it takes to run a small business successfully.
Cash flow touches upon virtually every aspect of running a business--payments, payroll, investing in inventory, paying vendors, and the ability to pursue exciting (but expensive) opportunities.
The speakers and mentors at QuickBooks Connect addressed the pain of these business owners, and more importantly the best ways to ease it.
Ariege Misherghi, Intuit's new head of its accountant segment, told the dramatic story of her parents' entrepreneurial journey in her keynote address.
"It's scary being an entrepreneur. It can be lonely. I was born in California to immigrant parents from North Africa. My parents fled for their lives and came here to start over. They started a small business to make a life for themselves here.
"They were alone. They had no one to guide them, and four kids to feed. You could tell when they struggled with their cash flow based on the food on our dinner table."
Just how critical is cash flow management for small business owners? Just take a look at some of the findings in Intuit’s recently completed “State of Small Business Cash Flow” survey:
- One of the most telling findings was that 69 percent of small business owners reported to have literally lost sleep thinking about cash flow, even if their company has never experienced issues with it.
How important is this for small business?
The Intuit study found that more than half (52 percent) of U.S. small business owners' companies have lost $10,000 or more by foregoing a project or sales specifically due to issues created by insufficient cash flow.
And on average, U.S. small business owners are losing $43,394 by foregoing a project or sales specifically due to issues created by insufficient cash flow.
When you multiply these numbers by the number of small business owners in the U.S., the numbers behind these missed opportunities become staggering.
One of the biggest factors contributing to cash flow crunches is outstanding receivables. Even if your company is doing a great job selling, crises happen when the payments aren't coming in in a timely manner.
The Intuit study makes this abundantly clear. Fully one third of American small business owners report having more than $20,000 in outstanding receivables, with the average being a staggering $53,399. Numbers like this can put a company out of business.
QuickBooks has addressed the accounts receivable issue with their product QuickBooks Payments. Invoices generated by QuickBooks Payments are enabled for immediate payment. The results have been impressive, with business owners reporting they're three times more likely to get paid on the same day using electronic payment enabled invoices.
Rania Succar, VP and Business Leader of QuickBooks Payments and Capital, knows the pain points of small business owners and the cash flow crises they face.
"Small businesses start up and somehow manage to scrap together the funds they need to get started," she said. "Then the bills start coming in and they're waiting to get paid from their customers. Then they start piling in on their personal credit, they'll get a home equity line of credit or they'll use their own credit cards and eventually they end up hurting their personal credit."
Succar noted that QuickBooks's ecosystem of products help to ease those cash flow worries.
"Small businesses can use QuickBooks for money in - to get payments and capital - and for money out - to pay payroll, contractors, and other invoices," she noted. "So we're uniquely positioned to manage their cash flow.
In its focus on cash-flow related missed opportunities, Intuit has been able to leverage the data gained over dozens of years to determine more precisely which small businesses are credit risks and which ones are creditworthy.
Through the analysis of such data, QuickBooks Capital has funded many small businesses which had been previously denied a loan. In fact, 60 percent of businesses that had been previously denied a loan by other financial institutions were funded by QuickBooks Capital. In the past year, QuickBooks Capital has funded more than $140M in cumulative loans to worthy small businesses.
Another major issue small businesses face is making payroll, often the biggest expense. This was certainly evident in the Cash Flow survey, where 43 percent of small business owners were frequently at risk of not being able to pay their employees on time and 32 percent, which had to pay their employees late due to cash flow crunches.
QuickBooks provides two solutions to the payroll issue. First, it offers same-day payroll payments (so businesses don't have to take out cash two weeks ahead) and QuickBooks Capital, which offers a high-rate of approval on short-term loans, allowing businesses to make payroll when they otherwise wouldn't.
Laurent Sellier, Intuit's VP and Intuit Business Leader, QuickBooks Online Payroll, said that QuickBooks has an array of tools now designed to alleviate cash flow worries, with payroll being a major pressure on payroll.
"Payroll is often the biggest expense people have and that's usually every two weeks," he said "Now that you can (fund payroll) on Friday and pay on Friday.
"We see that, on the average, people can keep $9,000 longer in their pocket for much longer every month, because they don't have to push that money to their employees too soon."
Coming to QuickBooks Connect, he said, is a great way for business to learn to deal with all of their cash flow concerns.
"People are hungry for information, because there are a lot of new things coming their way to make their lives easier and helps them, hopefully, do their work faster and spend more time with their children."