Businesses That Suffer Cash Flow Problems | Blog | SWRS (2024)

8 Businesses That Suffer Cash Flow Problems: Is Yours One? – Southwest Recovery Services

Cash flow problems can cut to the heart of any business. Case-in-point, a U.S. Bank study recently found that82 percentof small businesses in the United States fail because of issues related to cash flow. And one of the biggest drivers of this is a client not paying on time (or at all). If you’re in any of the following sectors, then it’s likely you could experience this problem.

Businesses Prone to Cash Flow Problems

Virtually any type of commerce can be affected by this issue. To cut the suspense, we’ll go through each of the eight promised right now:

  • Service providers: plumbers, lawn care providers, construction companies, designers, writers — pretty much anyone who provides a non-tangible in exchange for payment runs the risk of running into cash flow problems.
  • Landlords and property owners: this goes for both the residential and commercial sides.
  • Healthcare practitioners: one of the most likely areas to get dinged with non-repayment. At Southwest Recovery Services, we specialize in helping practitioners get paid so they can continue to provide a high quality of healthcare to each patient.
  • City and county governments: most cities and counties provide some type of service to their citizens, but municipalities are especially at risk due to their closer interaction with the public through water service and other utilities.
  • Utility providers: energy companies especially. And yes, you can always just shut off the service, but that doesn’t make up for the resources already expended in providing service to the non-paying customer.
  • Retail stores: because it’s an industry where there is heavy use of credit cards, retail stores run the risk of not getting paid whenever credit card fraud occurs. There is approximately$5.5 billion of credit card fraudworldwide. That’s quite a chunk of change to be missing out on.
  • Wholesalers: large quantity orders often require lengthier repayment terms. The longer you go from the purchase point, the less likely you are to realize payment.
  • Product manufacturers: same boat as wholesalers.

The Cash Flow Solution You Cannot Ignore

If your business fits into one of these areas, then you run the risk of facing cash flow problems, but luckily, there are solutions. Southwest Recovery Services has advanced negotiation skills, legal knowledge, and an aggressive tack for getting our clients the money they deserve. If you need a proven service to collect on outstanding payments without it interfering with the day-to-day operations of your business, we’re here to help.Contact us todayto get started.

Businesses That Suffer Cash Flow Problems | Blog | SWRS (2024)

FAQs

Businesses That Suffer Cash Flow Problems | Blog | SWRS? ›

Businesses Prone to Cash Flow Problems

What industries have bad cash flow? ›

Small businesses are by far the most likely to experience cash flow problems, especially in industries such as hospitality, manufacturing, and services. Cash flow issues are one of the biggest reasons that businesses fail, but it doesn't have to happen to your company.

How many businesses fail due to cash flow problems? ›

According to SCORE, 82% of small businesses fail due to cash flow problems. Cash flow is a blanket term that has many underlying roots. Cash flow is simply a metric that indicates how money is coming in and being spent at your business.

Why do some businesses have poor cash flow? ›

You see, the majority of small business cash flow problems are caused by late payment of money owed. By taking some simple action to reduce the risk of your invoices being paid late, your cash flow worries will be significantly fewer and you can enjoy a good night's sleep again!

What is one example of when cash flow can be a problem to a business? ›

Expensive borrowing. Debt payments can cause cash flow problems when a business can't afford its financing. Paying off business loans and high-interest credit cards can take much of a business's revenue.

Why did Nike have cash flow problems? ›

By 1968, revenues had reached $150,000 and the trials of success began. As running started to become a mainstream sport, sales skyrocketed and supply couldn't keep up with demand. At the same time, supplier payment terms were having a brutal impact on cash flow.

What happens if a business has poor cash flow? ›

A sustained period of negative cash flow can make it increasingly hard to pay your bills and cover other expenses. This is because your cash flow affects the amount of money available to fund your business' day-to-day operations, otherwise known as working capital.

What business has the highest failure rate? ›

Information-based industries have the worst survival rates.

They also have the highest failure rate at every benchmark we looked at: 1-year failure rate: 27.6% 3-year failure rate: 49.7% 5-year failure rate: 60.9%

Why do 80% of business fail? ›

To put things into perspective, more than 80% of business failures are due to a lack of cash, 20% of small businesses fail within a year, and half fail within five years. But it doesn't have to be that way. In fact, many businesses can avoid cash flow problems with proper cash flow forecasting.

Why 90% of small businesses fail? ›

According to business owners, reasons for failure include money running out, being in the wrong market, a lack of research, bad partnerships, ineffective marketing, and not being an expert in the industry. Ways to avoid failing include setting goals, accurate research, loving the work, and not quitting.

What industry has the most cash flow? ›

Service. Service businesses tend to have high cash flow because they usually have minimal manufacturing, storage and distribution costs. A small consulting firm doesn't have to invest in expensive manufacturing equipment or warehouse space.

Which industries are cash rich? ›

Technology sector companies, and ecommerce companies combined accounted for the biggest share of this cash pile with reserves of nearly $858 billion.

What is most likely to cause a cash flow problem? ›

Late Payments from Buyers

This is one of the biggest cash flow issues affecting businesses. As businesses need to pay expenses, a delayed payment reduces cash inflows while adding pressure to pay bills on time.

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