Rose Report: Issue 63

Numbers Count in Small Business Success

By Ted Rose, CEO, Rose Financial Solutions 

Small businesses are the heart of our nation’s economy. In fact, according to the Small Business Administration’s latest statistics, small businesses account for 99.9 percent of all U.S. companies. Not only do small businesses help to drive our economy, but they also create two-thirds of all net jobs and have an impact on their local communities. That being said, starting and growing a business can be daunting for entrepreneurs, especially in uncertain economic times.  

A recent survey conducted by MetLife and the U.S. Chamber Small Business Index on the top concerns of American small businesses revealed that inflation is the leading concern for small business owners, with over half (53%) citing it as their biggest challenge. Revenue generation ranked second with 22%, followed by interest rates rising with 16%. Additionally, according to the survey, small business owners are increasingly concerned about access to funding, up from 6% in the first quarter of 2022 to 13% by the end of the year (Q4 2022).  

Many entrepreneurs have great ideas and the drive to make their businesses successful. Yet, according to the Small Business Administration (SBA), approximately 20% fail within the first year, and nearly 66% will have shut their doors by year ten. What is the number one reason small businesses fail? According to a U.S. Bank study by Jessie Hagan, 82% of companies fail due to cash flow mismanagement.  

For long-term financial success, small business owners need to manage cash effectively. Cash flow issues rarely appear suddenly; instead, they accumulate over time. That’s why one of the most important responsibilities a small business owner must undertake is monitoring cash flow and forecasting the company’s ongoing cash position. At the most basic level, cash management aims to maximize cash availability while still meeting obligations and avoiding the risk of failure. From financing and capital structure to growth objectives, cash management should drive a company’s decisions. 

Increasingly, businesses rely on data-driven information to help them make better business decisions. To assess your cash management needs accurately, one best practice is tying your budget to a cash forecasting tool. Cloud-based solutions offer real-time tracking of your company’s financial activity, giving you insight into your cash position at any time. Assessing key performance indicators (KPIs) and financial reports, such as the balance sheet, income statement, and cash-flow statements, is essential to reaching your strategic goals. Monitoring your KPIs monthly informs you of any changes to your company’s fiscal health, allowing you to act swiftly to get back on course. 

Another way to improve your chance of success is to have financial professionals working with you as a partner to help you avoid common pitfalls. Different from a bookkeeper who may be underqualified for specific tasks, outsourcing your finance and accounting activities provides you with financial advice and a big-picture perspective that involves much more than entering debits and credits accurately into the books. One of the most significant advantages is gaining access to an experienced and broad team of experts.   

At Rose Financial Solutions (ROSE®), we believe that obtaining financial clarity should be easy and affordable so you can more efficiently operate your business and build stakeholder value.  We wrap 28+ years of finance and accounting expertise into our small business solutions. Utilizing the best people + processes + technology, we’ve built our reputation as the leader in the next generation of finance and accounting outsourcing called Finance as a Service (FaaS). With the best practices, people, and systems in place, we provide our small business clients with the entire range of services at a fraction of the cost of hiring more staff to manage functions. Schedule a meeting below to find out more.

This content is for information purposes only and should not be considered legal, accounting, or tax advice or a substitute for obtaining such advice specific to your business.