Business is always deemed as being hard. I have never seen it that way. Challenging? Yes. Hard? No.
How we perceive something determines how we react to it. If we think business is hard it becomes hard. If we look at it as challenging, then we believe we can overcome it and win – and this drives us forward.
But one thing I will grant you. When cash becomes challenging it can become hard to manage.
It seems small businesses are struggling with cash flow. In my own business we have seen price rises not just from staff pay rises but routine costs such as electricity (this went up 50% this quarter) and IT costs (so astronomical I do not want to think about it). And I have a business with relatively low debt so for those who have business loans I can imagine the thought process.
This has meant price increases and it seems I am not the only one. Many businesses need to increase prices, or they have to work out how to provide the same service with less income. If you do that then this is likely to lead to a position where business owners need to dip into personal savings. Never a good thing.
As many of you know we are great fans of Xero, the accounting software. They recently prepared a report which surveyed small and medium-sized businesses on cash flow management. It was not great reading. Xero found there was significant financial stress on businesses due to the current economic climate.
In summary it found
- 27% per cent of business owners have had to use personal savings to keep their businesses afloat.
- And a whopping 34% per cent, are unable to pay themselves.
- 26% could not pay their bills on time.
- 40% felt their sales had stalled.
- 60% experienced cash flow issues with 14% facing serious or significant challenges.
One of the reasons is late payments by customers. If customers pay late, it means we cannot pay our bills so our suppliers gets paid late. This means our suppliers cannot pay their suppliers on time and we have a domino effect of sustained consistent late payments. It’s a spiral that is very hard to get out of.
I always talk about creating daily money freedom (not having to worry about money on a day-to-day basis), financial freedom and wealth because I believe that is what most business owners want. They just don’t know how to get there.
The report basically said the same thing because:
- 45% of small business owners were worried about their personal financial future
- 48% are concerned about their business’s financial future.
- And ONLY 49% were confident their businesses were on track to achieve their financial goals.
- 57% of business owners report feeling stress,
- 50% have anxiety and
- 48% trouble sleeping over the last 12 months.