If you’re like most small business owners, you’ve been concerned enough about your company’s cash flow that your worry has kept you up at night.

Figuring how to monitor your cash flow is a part of owning a business – because how well you monitor the money that flows in and out of your business not only impacts your relationships with employees, vendors, clients and customers but it affects the wellbeing of your company.

“While money is the fuel that runs their business and next decision, it is also the reason they go out of business,” states a 2019 report by Intuit and Wakefield Research, which surveyed thousands of small business owners about cash flow.

Cash Flow: A Common Struggle

Sixty one percent of small business owners said they regularly struggle with cash flow, according to the study, which surveyed solopreneurs and companies with as many as 100 employees.

“It’s the thing they lose sleep over,” says the Intuit report, which surveyed 3,000 small businesses in the U.S. the UK, Australia, Canada and India as part of the study.

Sixty-nine percent of the small businesses surveyed said they’ve been kept up at night by concerns about cash flow. 

What’s causing the worry?

1. Not understanding how cash flow works

The Intuit research shows that not understanding how cash flow works and poor cash flow management are among the top reasons businesses fail.

It’s important for you as a small business owner to understand how to effectively track the movement of your money in order to stay on top of keeping positive cash flow.

“You want to generate more money than you’re spending. This sounds simple, but plenty of profitable businesses run into cash flow problems,” writes Kathryn Pomroy for the Intuit QuickBooks Resource Center website. 

“It can be challenging to balance regular business expenses — like salaries, rent, and technology updates — with the sporadic revenue and periods of negative cash flow that can come from seasonal patterns or investments in growth.”  

2. Not making accounting a priority

Ritika Puri, cofounder of Storyhackers, says managing cash flow was one of the most important lessons she learned while growing the content services agency to a 28-person team. 

By not prioritizing the accounting side of the business, she said, her small business experienced a cash flow challenge, which not only stood in the way of pursuing the company’s vision but put the company’s financial structure at risk.

“We learned the hard way that growth doesn’t always correlate with cash flow,” writes Puri in an article on the QuickBooks website.

3. Getting ahead of cash flow for payroll

In the Intuit report, 43 percent of small business owners said paying employees by their assigned payday was at risk because of cash flow issues. And 32 percent reported having to pay their employees after their paydays.

“We pay our team faster than we receive funds from customers,” Puri said in the QuickBooks article. “This is an inherent challenge for most service business, but when it takes three, six, or even nine months to collect on accounts receivable, CEOs start to get uncomfortable.”

4. Waiting too long for accounts receivable

Accounts receivable is called the lifeblood of a business’ cash flow – it’s the money owed to your company for products or services delivered or used but not yet paid for by customers. 

So, while you’re waiting for payments to come in – whether it’s due to customer delay or wait times from processing – cash flow will be affected.

Thirty-three percent of the U.S. small business owners surveyed in the Intuit study said their companies currently have more than $20,000 in outstanding receivables. And, the average U.S. small business has $53,999 in outstanding receivables.

Nearly two thirds (66%) of small business owners report that the time it takes the money to process after receiving a payment has the largest impact on their company’s cash flow, compared to not getting paid by customers or clients within the terms of the payment system.

Thirty-one percent reported the wait for payments to process was more than 30 days.

The Price of Cash Flow Problems

Cash flow issues can cause small business owners big headaches and real harm to their business, from problems with paying vendors and employees to lost revenues.

Of those small business owners who reported cash flow issues in the Intuit research study, 32 percent said it left them unable to pay vendors, pay loans, or pay themselves or employees. 

Fifty-two percent of U.S. small business owners in the survey said they had lost $10,000 or more by foregoing a project or sales specifically due to issues created by insufficient cash flow. And on average, according to the report, U.S. small business owners have lost $43,394 by not going through with a project or lost sales due to issues caused by insufficient cash flow.