Cash Flow is Improving, but Late Payments are Still a Struggle for Small Businesses

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According to the latest Small Business Pulse Survey results released by PaySimple, the majority of small business owners have a bright outlook when it comes to cash flow in 2012. But despite their optimism, 80% of small businesses are still plagued by late payments.

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“It’s encouraging that so many small businesses anticipate cash flow improvements in 2012, but the rate of late payments is quite alarming,” said Eric Remer, CEO of PaySimple. “When it comes to payment challenges, keeping track of everything is a struggle for small businesses overall, which seems to directly coincide with small business demand for ease of use in software solutions. For a small business owner, if a software solution isn’t easy to use, it simply won’t be able to help them manage their business and solve their challenges.”

Small Business Challenges & Cash Flow Outlook:

What’s keeping small business owners up at night? Finding new business and retaining customers are reported as top business challenges:

  •     55% reported finding new business as one of their top two business challenges
  •     45% reported retaining customers as one of their top two business challenges
  •     41% reported cutting costs as one of their top two business challenge

But, for now, cash flow worries seem to be a thing of the past:

  •     55% of small businesses report better cash flow in 2011 than in 2010
  •     82% of small businesses anticipate 2012 will be better for cash flow than 2011

Small Business Payments Trends:

Late payments are still a struggle for a majority of small businesses:

  •     80% of small businesses said they are experiencing late payments, with 40% reporting late payments every month

How are these small businesses handling their late payments?

  •     To follow up with their late paying customers, 71% use email and 63% use phone
  •     But many small businesses are not taking proactive measures with only 22% charging late payment penalties and 20% offering early payment incentives

What are the biggest challenges small businesses are seeing overall when it comes to payments?

  •     43% report “keeping track of everything” as a top payments challenge
  •     41% report late payments as a top payments challenge

Old ways of collecting payments are still popular with small businesses including cash and check payments via mail and in person.

  •     82% of small businesses accept checks and 66% still accept cash
  •     64% accept payments via mail and in person

With all the hype recently on mobile payments, it seems they have yet to become a reality for small businesses:

  •     Only 12% of small businesses report accepting mobile payments

Trends in Managing a Small Business:

When asked where they turn to for advice, the internet was the hot spot, with getting advice from other small business owners coming in at a close second:

  •     61% of small businesses perform general internet searches for advice
  •     55% talk with other small business owners to get advice and information

To manage their business, the most popular software solutions used by small businesses are accounting and email marketing:

  •     68% of small businesses use accounting software
  •     61% of small businesses use email marketing software

Not many small businesses were planning to purchase software in the upcoming 12 months:

  •     19% of small business plan to purchase accounting software in the next 12 months
  •     12% of small businesses plan to purchase online advertising software in the next 12 months

What matters to small businesses when evaluating software?

  •     Features and functionality were most important with 69% rating it as one of the top two criteria
  •     Ease of use came in at a close second with 44% rating it as one of the top two evaluation criteria

Further confirming the importance of ease of use, 43% of small businesses reported that their biggest frustration with previous software was that it was too hard to use.

What mobile devices are small businesses using for their business? Reported usage of iPhones and Android smart phones were almost evenly split:

  •     35% of small businesses use their iPhone for work
  •     31% of small businesses use an Android Smartphone for work
  •     38% say they use mobile apps for business purposes, 13% don’t use mobile apps yet, but plan to start using them soon

About the Survey
This PaySimple-sponsored survey was administered in October 2011 to small business owners and employees. Results include responses from 223 respondents across a range of business-to-business and business-to-consumer industries. Of the respondents, 100 percent of are located in the U.S. and 65 percent of these organizations have 4 or less employees. 63 percent have less than $250k in annual revenues and 53 percent have been in business for more than 5 years. Surveys are subject to errors, including sampling coverage error, recording error, and respondent error.

About PaySimple
PaySimple provides cloud-based accounts receivable solutions to simplify and empower small businesses. Thousands of small-to-mid-sized businesses use PaySimple’s receivables automation technology to accept electronic payments, manage their customers and automate their billing. In addition, PaySimple also provides custom-branded solutions to large enterprises such as JP Morgan Chase and American Express looking to provide value-added offerings to their small business members. To learn more about PaySimple or its partnership opportunities, call 800-466-0992 or visit Follow PaySimple on Twitter at

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Sarah Jordan
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