According to accountancy software supplier QuickBooks, more than four in 10 small business owners have “frequently been at risk of not being able to pay employees by payday”.
The study highlights the number one challenge faced by enterprise owners today: poor cash flow.
The relationship between cash flow and payroll is closely interlinked, says Quickbooks. For example, 39 per cent of businesses say at least a third of their expenses goes towards covering payroll, but if a business doesn’t have the cash in the bank, it can’t pay its workforce, risking a further decline in productivity and profits.
According to the research, around 65 per cent of business owners accommodate for poor cash flow by “moving money around in order to make payroll” to avoid damaging the employee-employer relationship. Additionally, around a third of business owners who took part in the study say they still complete payroll and timesheets by hand – costing even more time and money.
A similar study, published by Xero, found that 28 per cent of small business owners say “managing cash flow” is a key challenge, with just 50 per cent of small businesses reporting positive cash flow in 2019.
So, how can employers ensure that cash is flowing throughout the month?
We believe that innovative technology, such as Xero’s integrated cash flow management tools, can make the difference between staying in or out of business.
With 50 per cent of businesses failing within their first five years due to cash flow shortages, enterprising owners can use features like integrated cash flow management tools to automate data input, build bespoke insights, manage invoices and project working capital. Its automated cash flow forecast tool, for example, uses the average of your previous 12 months of data to instantly populate a cash flow forecast, which can be exported or published across your team.
If you would prefer to use a dedicated cash flow tool, add-ons such as Fluidly may work for you. The developers say Fluidly “integrates seamlessly” with accounting software “to produce AI-powered cash flow forecasts that are always up to date, maximise opportunity and overt risk”, saving time and helping business owners get paid quicker.
Stripe is a powerful tool in the world of cash flow. Stripe enables customers to pay invoices directly using their preferred method of credit or debit card payment, meaning your business will get paid faster.
The cash flow benefits of early payment are huge. According to Xero, businesses who use Stripe to process payments are paid, on average, 15 days faster than businesses who do not. Stripe’s other functions include setting up recurring card payments for repeat billing customers and full integration and reconciliation with accountancy software providers.
To learn more about how accounting software can help you save time and money and improve cash flow, read our new blog, Five finance apps that will change your life.
About Andrew Price
We work with business owners to build the business they need to have the life they want. If you want to talk about how we can boost your business, get in touch with us on 01803 296678 or email email@example.com.