Illustration of a calculator, folder, and charts to show potential cash flow problems a small business may have.
Cash flow

7 cash flow problems (and solutions) for small businesses

Positive cash flow is what keeps your business moving. With positive cash flow, a business has enough liquid cash to cover its liabilities. Cash flow problems become negative cash flow when a company’s outflow exceeds its cash inflow. These problems threaten businesses globally and result from macroeconomic issues, like natural disasters, recessions, and wars, to microeconomic issues like your business decisions, performance, and other factors. 


Planning for cash flow problems can empower you to cushion—or even avoid—financial blows to your business. Let’s look at some common cash flow issues and how cash flow management and sound accounting practices can help you manage your money:



  1. Lack of cash reserves
  2. Expensive borrowing
  3. Decreasing sales or profit margins
  4. Outstanding receivables
  5. Uncontrolled business growth
  6. Too much inventory or seasonal changes in demand
  7. Inaccurate forecasting or bookkeeping practices

1. Lack of cash reserves

To protect your business in case of a drop in revenue, it can be helpful to have enough cash reserves to cover up to six months of expenses. While putting aside that much cash in your business bank account may seem difficult, pinpointing exactly how much you need can inspire you to save more and eliminate unnecessary costs. 

Lack of cash reserves solution 

Project your cash flow by estimating your sales, determining when you can expect payments, and estimating all expenses (fixed and variable). This system can give you a figure to aim for as you build a cash reserve


Once you know how much cash you need in your reserves, you can begin building an emergency fund. QuickBooks can help you automate cash flow projections so you know where you stand financially. A QuickBooks Checking business bank account gives you access to Envelopes, a savings account where you can earn APY so your money works as hard as you do. With Envelopes, you can separate your funds into different categories to help you save toward specific goals, like building a business emergency fund.


94% of small business owners said they’ve faced financial challenges in the last year, according to the Federal Reserve.


2. 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.

Solutions for expensive borrowing

Payment solutions like supplier financing can help businesses improve cash flow and avoid additional debt. Refinancing loans to secure lower payments or debt consolidation may also help make borrowing more manageable. Term loans* with competitive rates can also help improve cash flow.

3. Decreasing sales or profit margins

Selling products and services for too little can result in low profit margins. Similar problems can arise when sales teams offer discounts that cut into profit margins. There are plenty of money-saving ideas that you can use in the short- and long-term to improve profit margins.

Solutions for managing decreasing sales or profit margins

Create a short-term business survival plan and pricing strategy. Reviewing expenses and pricing let small business owners determine if they should adjust prices or discontinue products or services with weak margins.


The Federal Reserve found that 54% of businesses that faced financial challenges in 2022 named uneven cash flow as one of the problems they navigated.


4. Outstanding receivables 

Late payments on invoices can cause cash flow problems for small businesses. When outstanding receivables are tying up your money, it can leave your business in a poor cash position. 

Outstanding receivables solution

Review payment terms and collection policies to speed up accounts receivable. You can get money coming in faster if you: 

  • Send invoices earlier.
  • Review your billing cycle and payment terms.
  • Break up payments into project-based weekly or biweekly installments.
  • Request payments from past-due accounts.
  • Ask for a deposit or partial payment upfront.
  • Encourage or incentivize early payments.
  • Accept multiple payment methods.
  • Improve cash flow with invoice financing, such as Get Paid Upfront**. With Get Paid Upfront, if approved you can access invoice advances and get funds as fast as 1–2 business days instead of waiting on net terms.¹ You can apply in just minutes when you use QuickBooks Online and QuickBooks Payments, and applying doesn’t affect your personal credit score.  
  • Consider selling your debt through invoice factoring.

A PayPal survey found that 59% of customers will abandon an online cart if they can’t pay using the method they prefer.


5. Uncontrolled business growth

Cash flow mistakes are common during high-growth phases. Cash flow shortfalls can come from over-forecasting growth and when expenses exceed working capital. If you’re in a high-growth period, it’s critical to recognize the difference between profit and cash flow.

Uncontrolled business growth solution

Look for ways to slow down and prioritize getting your finances in order. If you grow too quickly, tracking and learning to manage cash flow can become much more difficult. Try implementing new accounting measures for a clearer picture of your financial situation.




In a 2022 survey, we found that 68% of small businesses have cash flow problems.


6. Too much inventory or seasonal changes in demand

Overinvesting in inventory can leave businesses in a pinch if sales don’t cover investment costs. Monitoring inventory can help them avoid overstocking and running out of key products. 


Many businesses experience seasonal fluctuations in demand. If business owners don’t account for these changes, they can lead to less-than-ideal cash flow situations. 

Solutions for too much inventory or seasonal demand changes

Business owners should consider using an inventory management system to balance their inventory. Keeping inventory on hand for the shortest time possible can keep inventory from contributing to cash flow shortages. Cash flow projections and accurate sales forecasting can help small business owners plan for seasonal changes.


40% of business owners with cash flow problems in 2022 said they were using cash reserves to close gaps.


7. Inaccurate forecasting or bookkeeping practices 

It can be relatively straightforward to keep track of business cash flow and forecast sales. But as a business grows, cash management may become more complex. If you don’t know exactly how much you have coming in and going out, it will be difficult to accurately forecast what you’ll need in the future, let alone understand what you’re dealing with.

Inaccurate forecasting or bookkeeping practices solution

Consider getting help with your bookkeeping. A professional accountant or bookkeeping service can help find and eliminate accounting mistakes. They may also be able to look at your historical cash flow and tell you where you went wrong and how to create more accurate projections in the future.

Other cash flow solutions 

Cash flow problems can threaten your business’s health, whether you’re self-employed or a small business owner with employees. Fortunately, you can use these tactics to help tackle common cash flow problems.

Reduce and negotiate your expenses

Reducing or negotiating expenses is a smart way to encourage positive cash flow. With more working capital, you can prioritize expenses and prevent cash flow problems from spiraling out of control. 


Depending on your circumstances, a few creative changes may help get you back to positive cash flow.


  • Discontinue nonessential services temporarily.
  • Expand virtual services.
  • Cancel or reduce premium services.
  • Move to a lower-cost supplier temporarily.
  • Reduce operating costs.


Looking for methods to reduce operating expenses isn’t easy, but it will bring essential and non-essential expenses into the spotlight. 

Create a short-term business survival plan 

For small business success, examine your business plan, processes, operations, income, and expenses. If your business works on a per-project basis, use job costing to review your business’s profit and loss statements and margins. Identify the lion’s share of expenses and profits in products, services, clients, and labor. 


Understanding this information can give you an accurate cash flow projection under normal circumstances. It can also help you predict how scaling back will affect your business. 

Consider borrowing options

Borrowing money is another way to balance your cash flow. Ideally, you opened lines of business credit when your finances were in a better place. But if that isn’t the case, ask your current financial service provider what they can offer before turning to other lenders.


Although short-term loans can seem like a lifeline when you’re experiencing problems with cash flow, there are caveats. First, you may need to have a documented business plan and cash flow forecast to show lenders. Second, interest rates and other terms and conditions can have lasting consequences. It is important to read the fine print before borrowing. Finally, if there’s an internal flaw in your business, a fresh injection of cash won’t solve cash flow problems, it will only delay them. 

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Remember, negative cash flow doesn't necessarily mean that a business has a cash flow problem. It’s common for a business to have negative cash flow after making large payments or experiencing seasonal business fluctuations. Cash flow only becomes a problem when there isn't enough cash coming in to cover outflow.


Spend some time looking at your cash flow problems and solutions and consider finding ways to make things clearer so you have a better understanding of your cash flow at any given time. Consider new accounting software that can track net cash flow and many other factors related to your business’s financial standing. Explore plans to see the many ways QuickBooks can help you stay in control of your business finances. 


Cash flow problems are easier to manage when they don’t come as a surprise. With QuickBooks Money, you’ll get insights to empower your decisions, and tools to help you when cash runs short.

infographic featuring cash flow problems a business may face, including low cash reserves, expensive borrowing, and too many outstanding receivables with icons for solutions like borrowing money, using cash flow projections, and using accounting software.

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Cash flow planner: Cash flow planning is provided as a courtesy for informational purposes only. Actual results may vary.


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This content is for information purposes only and information provided should not be considered legal, accounting or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.


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