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New Citibank® Small Business Pulse Finds Sales Growth Isn’t Enough To Keep Cash Flowing

Maintaining and increasing sales is the most important short term business issue for 74% of small business owners, 41% of whom cite lackluster consumer spending as the root cause, according to the Citibank® Small Business Pulse released today.

Both the cause and effect of weak sales lead to cash flow concerns. According to the survey, 50% of respondents have experienced a sudden cash crunch in the last 12 months. Despite the need for careful cash management, 78% of small business owners have given payment extensions to customers.

“We admire and support the resilience and commitment shown by small business owners who find ways to move their companies forward,” said Jerome Byers, head of Citibank Small Business. “In recent years, companies have tightened belts, gained efficiency and reinvented their businesses to survive in a tough economy.”

CASH FLOW IS KING

Managing cash flow is a job most small business owners won’t trust to anyone but themselves. Nearly three quarters (73%) say they are “on top of it” and manage their cash flow daily. Thirty percent of respondents say the greatest challenge to managing cash is slow/delinquent receivables and bankruptcies, while 24% blame late or non-payments for a sudden cash crunch in the last 12 months. Yet 23% of respondents find making a collection call the most uncomfortable business finance challenge – second only to reducing staff (35%). Referring to the need for sales, 28% report that their sudden cash crunch was due to sales that did not pick up as expected.

“A slow economy forces the small business owner to focus on daily finances,” said Byers. “That’s a difficult balancing act with the need to think broadly and strategically about business plans.”

BUSINESS CONDITIONS AFFECTING SALES

Despite a quarter-to-quarter reduction in confidence, small businesses report slightly better business conditions than a year ago. In August 2012, 38% of respondents found business conditions positive, increasing from 34% in August 2011. Another 25% say business conditions are poor, relatively flat from the last survey in May (23%), but reduced significantly from 31% a year ago. Still concerned about the future, 85% of those surveyed believe the economy may experience another downturn. That number is slightly lower than the 90% who expected it a year ago.

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