The report, titled Cash Flow Compass, indicates that 42 per cent of small business owners are overconfident in their money management. Examining over 750 small and medium businesses (SMBs), the report revealed that 62 per cent of owners admit cashflow issues have had negative impacts on their business in the last year. Examples include missed growth opportunities, delayed projects or reduced staff hours.

Unfortunately for business owners, these negative impacts could be commonplace going forward as 91 per cent of respondents said they have cashflow issues. The reasons given include labour costs, seasonal fluctuations in business and late payments from clients.

Another big problem causing cashflow issues is business owners’ money management. Only 24 per cent are organising their funds across various accounts. Meanwhile, 95 per cent make financial decisions solely on their bank balance.

Overconfidence is a down hill slope

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’.

“Having a realistic grasp on your cashflow 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.”

SMBs in the US make up a huge chunk of the country’s GDP (44 per cent), with over 33 million firms employing over 62 million people. As US markets face volatility and small businesses grapple with changing interest rates and a tight labour market, it has never been more critical for owners to have a clear view and total control of their cash flow.

Cashflow problems are taking their toll

Other findings from the report include the impact of missed payments on cashflow. According to the report, almost a third (31 per cent) of US SMBs have missed or been late to pay major expenses, like their own salary, supplier bills, and rent.

Furthermore, the Cash Flow Compass identified that the top two negative results of cashflow issues include, missing out on growth opportunities and delayed/cancelled projects.

Lastly, the report found that cashflow struggles take a real toll on business owners. More than two-thirds of small business owners (71 per cent) say cash flow issues have had a negative impact on them personally. For example, causing stress and anxiety, burnout, and lack of sleep.

“When small business owners are in control of their cashflow, they can explore growth opportunities and square off against economic curveballs. Cashflow 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 cashflow control, and that shows up in the Compass. Fortunately, business banking solutions like Relay offer owners a more practical and detailed view of their cashflow, so that they always have their pulse on the money.”