I’m fascinated by the numbers Denise O’Berry turns up in her post Use Metrics To Manage Cash Flow – Small Business Expert Denise O’Berry. She quotes results of a survey sponsored by the American Institute of CPAs, which surveyed 500 owners of businesses averaging less than 10 employees and less than $2 million in revenues.

According to this, the biggest worry of small business owners, is (drumroll):

The number one issue facing small business is ensuring adequate cash flow from operations, according to 83% of survey respondents.

That’s Denise quoting Bill Reeb, CPA, surprising nobody. It is sort of like saying the number one issue in health is breathing.

(Of course, this is the AICPA asking … do you think (I’m just asking, that’s all) the results might have been different if the survey were taken by, say, the American Marketing Association? That increasing sales might have shown up as the top worry? That idea intrigues me. I’m just not a big fan of facts via surveys.) 

But this gets even more interesting, as Denise adds this:

Driving this issue is the fact that 51% of those surveyed say they don’t use a cash flow budget or forecasts to help manage their business and 32% say they don’t have specific metrics in place to monitor performance on a daily or weekly basis. And only 17% agreed that daily or weekly metrics are as important to them as their financial statements.

I commented on Denise’s post, wondering whether there might be a relationship between the roughly half of business owners who don’t plan and manage their cash flow and businesses whose normal operations don’t involve the cash-flow killers, sales on credit or product inventory. Sales on credit are not credit card sales, but rather business-to-business sales in which product or service is delivered to a business along with an invoice that will be paid later. That relates to collection days and accounts receivable. And product inventory means working capital is tied up in building and holding inventory, which separates the cash flow from the normal sales less cost of sales flow shown in a profit and loss statement.

I’ll tell you what taught me to watch cash flow, always, and very carefully: the lack of it. It wasn’t two years at business school; it was a growth spurt (sales doubled) that sucked up all the cash and left me looking for a second and third mortgage to keep the business going. That’s something you don’t forget.