A report from the JPMorgan Chase Institute has shown that small businesses are facing hardships when it comes to job growth and their financial well-being continues be a reoccurring issue. The report reveals that one of the biggest problems for small businesses is the continued instability that exist managing the cost of payroll. Since 2016 the job growth section for small business has seen a decline in job growth in the ending months with December having about 153,000 new jobs being opened which is short of what analyst were hoping would for (http://www.usnews.com/news/articles/2017-01-05/manufacturers-small-businesses-struggle-as-december-job-growth-cools). Another report entitled “The Ups and Downs of Small Business Employment” concurs with JP Morgan’s findings and that 68% of small businesses have decreased the number of workers they have and have disproportionately added fewer workers within that year as well.

      Payroll expense are essential for small businesses and if it’s not handled well it can affect the well being of the business and the people who work init too. Considering that small businesses employ more than half of the work force in America and pays 44 % of the national payroll expenses ignoring the issues that come with payroll mismanagement will be detrimental to the health of the American economy too. “With increased focus on the positive impact small businesses can have on the economy, it’s critical to understand what these new insights mean for job creation and policies that aim to support both small businesses and their employees,” says Diana Farrell, president and CEO of JPMorgan Chase Institute. Employers working in small businesses usually pay about $ 18,700 in payroll expenses per month and the payroll expenses themselves grow by 8.5% every year. One alarming new fact that has come is the reduced number of buffer days, days in which a business can manage without cash inflows, has reduced from 27 to 18 days except for restaurants which falls in 16 (https://b2b.dnb.com/2016/09/27/cash-buffer-days/). A survey study from Chase has revealed that only 50% of small businesses have enough cash on hand to last 27 days if they suffer a month long loss and that low wage, labor intensive businesses are in a even worst position then all other industries.

      What was revealed in the previous report was that instability in job growth and payroll has affects most small businesses with employees and that the newest small businesses experience the highest rate of instability when it comes to payroll outflows. Businesses with no employees hold more buffer days than those who experience volatility in their payroll which just so happens to be those with employees who work for them. If there is one thing that is clear it is that small businesses are facing a cash-flow crisis which could affect the employment status of workers within that business and so business owners must figure out how to fix their cash flow problems in order to resolve the other issues concerning job growth. To help manage their cash-flow it will be in the best interest of the small businesses to educate themselves on cash flow management to help them deal with cash inflow problems in the future.

      The one option that they can do is analyze their cash flow risk by determining if they can work with any other business that may not be as punctual when it comes to payment. By obtaining more insights business owners have the chance of extending their buffer days and avoid some cash flow issues which will help their business remain operational longer and improve employment growth rate. Buying business credit reports of companies they intend to work with can help solve that problem because they can see their payment history and other risks they have. These are some of the ways business owners can use to fix or prevent cash flow from ever becoming an issue and the more time they spend controlling the finances of their business the better it’ll be for future job opportunities in all industries for small businesses.

 

This article was heavily sourced from http://www.nacsonline.com/Media/Daily/Pages/ND0126176.aspx#.WIpGo1UrKUk and https://b2b.dnb.com/2016/09/27/cash-buffer-days/