By Karen Axelton
The nation’s small business owners are feeling increasingly optimistic, but are still struggling with cash flow concerns, according to the most recent Western Union Small Business Barometer. More than three-fourths (79 percent) of small business owners in the nationwide poll were optimistic that their annual revenue would either stay stable or increase in the next 12 months.
That’s good news, but concerns about cash flow and sustaining revenues top the list of worries that plague small businesses. Here’s some of what the survey found:
The smallest businesses are much more worried about their financial stability. Twenty-four percent of those with sales of $100K-$250K and 21 percent of those with sales under $100K cite “getting paid to ensure cash flow” as a top concern.
When it comes to money, small business owners are exhibiting a cautious rather than growth-oriented mind-set. Asked what they would do with extra cash reserves, 57 percent say they would pay outstanding bills and 47 percent would save the money. Just 22 percent would invest in sales and marketing, and only 16 percent would invest in IT, facilities or systems.
Asked what is the best part of owning a small business, the number-one answer was “control over income.” Yet small business owners in the survey are failing to take control of their income by performing some key steps that could help them get paid faster and more reliably, including:
Electronic invoicing. Over three-fourths of small businesses in the survey still use non-electronic invoicing. More than half print from a software program and hand-deliver or mail their invoices, but 25 percent still handwrite invoices.
Electronic invoicing is simple to do today, and many clients (particularly in business-to-business industries) prefer it. If you’re worried that electronic invoicing is too costly, consider this: The smallest businesses—those with sales under $100K—were most likely to use electronic invoicing. This could be because they’re younger (and have younger owners), or because they’re on tighter budgets and realize how cost-effective electronic invoicing can be.
Following up on late payments. Small business owners’ approach to late payers is less than effective. When faced with past-due payments, the vast majority (80 percent) send another invoice. About one-third send a past-due notice or an email. Just 38 percent make a phone call.
Thirty-one percent admitted the reason they send emails is to avoid a confrontation. No one likes to confront a client, but if you’re concerned about getting paid, you need to bite the bullet and pick up the phone. Emails can easily go unanswered—phone calls less so. And often, a simple conversation is all it takes to clear the air, work out a payment plan and ease your worries about whether you’ll ever get the money you’re owed.
How do you handle these issues?
Image by Flickr user meddygarnet (Creative Commons)