Pandemic highlights enduring pain point for small businesses: managing cash flow

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As Tom Groenfeldt notes in a new Forbes piece: “One of the leading causes of small and medium businesses going bust is a failure to manage cash flow.”

Groenfeldt drills into why exactly cash flow is a tricky problem for companies to solve, particularly smaller businesses. Citing a study of 600,000 businesses by JP Morgan, Groenfeldt looks at how much cash on hand businesses tend to have — i.e., how long their funds will last if cash flow were to dry up. The median was 27 days of cash. “So if their cash flow dries up, that’s how long they could last,” the study found.

“Growing businesses face numerous challenges as they scale and ensuring that they have control over cash flow is a critical life-and-death element of growth and survival,” Centime founder and CEO BC Krishna said in an exclusive interview with Groenfeldt.

The pair discussed why this issue endures. Cash flow’s complexity — it wraps in receivables, payables, liquidity and more — makes it tough to determine an appropriate solution. The pandemic has exacerbated an already tough proposition. But Centime can help. “Centime integrates with accounting packages popular for SMEs, like QuickBooks, and it uses artificial intelligence and machine learning to forecast how long cash will last,” Groenfeldt writes.

Groenfeldt also spoke with David Cota, who leads wholesale banking at First National Bank of Omaha. “There are many small businesses out there that are very credit worthy, and we lend to them everyday. It’s an active, viable part of our business,” Cota said. The key is transparency and forecasting: the components that will pave the way to credit, allowing small and mid-sized businesses to accurately represent their positions, bridge liquidity gaps and thrive.

For further details, read the full piece at Forbes.com here.

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