The right cash flow management can open growth opportunities for small businesses
Usually when people start their own business, it’s to explore a passion they have, not to spend hours at a time on back-office work. That’s the reality of small business, though. One of the biggest headaches, and obstacles to growth, is cash flow. An American Express survey of more than 1,000 small businesses found that only about half of small business owners are confident in financial decisions about their future. Those with 20 or fewer employees are especially hampered, and the major problem is cash flow management.
Most small businesses are using two to three cash flow management products for at least five hours a week; 18% of them are spending 10-20 hours a week on the issue.
“The practical reality is, there’s a lot more to the business side of this,” Brett Sussman, head of marketing & sales for American Express Business Blueprint & Banking, told BOSS. “There’s a need to make that business side easier for small business. There may be a number of tools out there, but they’re often targeted to larger business owners. How do we make it easier to start a business, become lean in those early years, and do well? I always have the philosophy of ‘learn quickly and fail cheaply.’”
Entrepreneurs are increasingly up against financial strains from inflation, the cost of labor and raw materials. They also need strong marketing to stand out among the many competitors that have sprang up as more than 10 million Americans filed small business applications in the last two years.
“The past few years coming out of the pandemic have made a systematic shock to the number of small businesses that are formed,” Sussman said.
That all translates to not having a lot of cash on hand at any given time, especially as increased interest rates make cheap money harder to come by. About 40% of small business owners are turning down opportunities because they’re unsure of their cash flow. They’re passing on potentially huge projects because there are upfront costs they’re not sure they can afford, or they can’t hire enough people in time to deliver.
One of the biggest desires survey respondents had was integration across cash flow management platforms, so they could see a fuller picture of what the balance sheet looks like in the near future. They want to be able to look out 30, 60, or 90 days and anticipate what’s coming so they know whether they can afford to take on those big opportunities.
“They have a separate place for the money that goes out of their business, the money that comes into their business, and the cash,” Sussman said.
Rediscovering the Passion
With streamlined cash flow management, entrepreneurs can take advantage of opportunities like bulk buying at discounted rates.
“With that sort of inventory in your store, you’re now seeing increased foot traffic, your marketing is more effective because you can talk about a new wine or a truffle that you were able to procure for your restaurant, things of that nature,” Sussman said.
Another avenue small business owners are exploring to save time is AI. More than 40% of survey respondents said they’d like to incorporate AI into business decision-making. Use cases include AI in customer service such as chatbots, developing marketing materials, and fraud detection.
With the time savings, entrepreneurs can spend less time on their back office and more time on what they’re passionate about, the things that made them start their own business in the first place.
The entrepreneurial spirit is alive and well. Almost two thirds of Gen Zers have indicated they want to start or intend to start their own businesses, Sussman said.
“Why they do that is often autonomy, freedom, a passion for a certain area,” he said.
With tools that can streamline cash flow management, they can keep that passion without losing it in a sea of paperwork. The American Dream is about pursuing those passions, building a business from the ground up, and making it into a success. In our dreaming, we often forget about the grunt work that goes into that, but tools are emerging to make it easier to turn those dreams into reality.