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New Relay ‘ Cash Flow Compass ’ uncovers small businesses are 42 % overconfident in their cash flow control
Small business owners are , on average , 42 % overconfident in their money management , according to a new survey of 750 + small and medium businesses ( SMBs ) by online banking and money management platform , Relay , and independent research company , RKI . This overconfidence score reflects a significant gap between the perception and reality of cash flow control among owners , which the Compass determined through specific questions that assess profitability , runway , missed payments and other factors . Outlined in Relay ’ s new Cash Flow Compass report , the survey also unearths the impact of this overconfidence . While most business owners believe their cash flow control is strong , the Compass reveals that 62 % admit cash flow issues have had negative effects on their business in the past year , such as missed growth opportunities , delayed projects or reduced staff hours . The Cash Flow Compass explores the survey findings with expert commentary from small business advisors and other business leaders , including Mike Michalowicz , serial entrepreneur and Creator and Author of Wall Street Journal bestseller , Profit First .
Michalowicz selected Relay as the official banking partner of Profit First for its ability to create multiple , individual nofee accounts .
Relay ’ s Cash Flow Compass combines new data on small business cash flow , actionable expert advice and a first-of-its-kind cash flow quiz for SMBs to measure their own cash flow control . Key findings include :
• Cash flow issues are common : 91 % of business owners and managers have cash flow issues . The top three causes are rising labour costs , seasonal fluctuations in business and late payments from clients .
• Owners check their bank balance daily but are missing the full picture . A whopping 95 % of small business owners make financial decisions based on their bank balance alone . Only 24 % are organising their income across different accounts , which offers a more granular view .
• Almost a third of businesses have missed big payments in the last year . According to the report , almost a third ( 31 %) of US SMBs have missed or been late to pay major expenses , like their own salary , supplier bills and rent .
• Cash flow problems can kill progress . The Cash Flow Compass identified that the top two negative results of cash flow issues include missing out on growth opportunities and delayed / cancelled projects .
• It ’ s personal : cash flow struggles take a real toll on business owners . More than two-thirds of small business owners ( 71 %) say cash flow issues have had a negative impact on them personally . For example , causing stress and anxiety , burnout and lack of sleep . x
“ Having a realistic grasp on your cash flow is crucial for any small business ,” said Michalowicz . “ Relay ’ s report reveals business owners are overconfident and that can lead to risky decision-making . The fastest way to get a better understanding of your cash flow is to organise your money with accounts based on the purpose of those dollars . Why ? Because your bank account is where you ’ ll go to understand if you have enough money for your next expense .”
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