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Research finds SMBs overconfident in cash flow control

Wednesday, August 14, 2024 — 14:34:09 (EDT)

NEW YORK, Aug. 14, 2024 /PRNewswire/ - 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.

New Relay 'Cash Flow Compass' Uncovers Small Businesses Are 42% Overconfident in their Cash Flow Control (CNW Group/Relay)

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 & Author of Wall Street Journal bestseller, Profit First.

"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 organize 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," he says. Michalowicz selected Relay as the official banking partner of Profit First for its ability to create multiple, individual no-fee 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 labor 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 organizing 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 U.S. 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/canceled 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.

Today, +33 million small businesses employ +62 million people, and contribute nearly 44% of the country's GDP. As U.S. markets face volatility and small businesses grapple with changing interest rates and a tight labor market, it has never been more critical for owners to have a clear view and total control of their cash flow.

"When small business owners are in control of their cash flow, they can explore growth opportunities and square off against economic curveballs. Cash flow clarity also means owners can sleep better and can reduce their stress, which is important to the success of any business," said Yoseph West, Co-Founder and CEO of Relay. "There is a powerful optimism at the heart of every small business, but sometimes that optimism can skew a business owners' perception of their cash flow control, and that shows up in the Compass. Fortunately, business banking solutions like Relay offer owners a more practical and detailed view of their cash flow, so that they always have their pulse on the money," said West.

Business owners can check out the Cash Flow Compass to take a powerful quiz that measures your own cash flow control, and to download the full report featuring more survey findings and expert tips to unlock cash flow clarity.

Methodology:

The Cash Flow Compass survey was conducted in June 2024 by Research+Knowledge=Insight (RKI), an independent research company. The survey involved 760 small businesses across the United States, all with annual revenues of $240,000 or more and 2 to 499 employees (with most businesses having 2 to 99 employees, and some representation from those with 100 to 499 employees). The margin of error for the survey is +/- 3.6 percentage points, 19 times out of 20.

About Relay:

Relay is an online banking platform that puts business owners in complete control of their cash flow and makes it easy to understand precisely what you're earning, spending and saving. With Relay, entrepreneurs can make the smartest decisions for their businesses. Disclaimer: The Relay Visa® Credit Card is currently available to eligible Relay customers by invite only. Relay is a financial technology company, not a bank. Banking services and FDIC insurance are provided by Thread Bank; Member FDIC. The Relay Visa® Business Credit Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.

For more information, please visit www.relayfi.com

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Source: Company press release.