Small business cash flow: The State of Payroll 2020

We know cash flow is vital to the success and growth of any business. That’s why over the past two years, we’ve studied the topic to better understand the behaviors, attitudes, and cash flow challenges experienced by small businesses and self-employed professionals around the world.

Not surprisingly, for the second year in a row, we found that payroll has a profound impact on small business cash flow. This is because payroll is often one of the largest expenses for small business. In fact, 39 percent of businesses globally say that at least 30 percent of their expenses goes toward covering payroll.

It may sound obvious, but if a business doesn’t have cash, it can’t pay its workers. This year, more than 4 in 10 (43 percent) of small business owners said they have frequently been at risk of not being able to pay their employees by payday.

Even more business owners — 65 percent — said they’ve had to move money around in order to make payroll.

This is worrisome for a few reasons. Of course, there are the obvious cash flow implications of not having enough money on hand to pay those who work for you. Bu further, payroll is a time-sensitive expense; employees expect and need to be paid on time, and late or inaccurate paychecks can greatly damage the trust and relationship between employer and employee.

A positive dynamic between employer and employee is incredibly important to maintain, but small business owners may not always know how to navigate these relationships, especially when a payroll issue is involved. In fact, 70 percent of business owners in the study, “The State of Small Business Cash Flow,” said that they have had HR questions or problems they did not know how to handle.

With our new expanded QuickBooks Payroll suite of offerings, we’re helping business owners overcome these cash flow and human capital management challenges. Thanks to innovations like Same Day Direct Deposit, money will stay in the business’s account until the day employees are actually paid. And, the new lineup goes way beyond payroll. In addition to allowing business owners to run payroll automatically, it also lets them track time on the go, get expert-live assistance, receive protection from tax penalties, as access a number of other HR and employee services, including health benefits and workers’ compensation. This delivers business owners the confidence that their payroll is done right and on time, while also strengthening the human connection between business owners and those who work for them.

On top of cash flow and HR issues that can arise for small businesses, there is still the matter of time. The study found it takes 41 percent of business owners one week or more to prepare payroll, and that more than a third (34 percent) still completed payroll through manual spreadsheets.

An additional study from the QuickBooks Payroll team found that business owners spend an average of more than four hours calculating, filing, and preparing payroll taxes. By automating the tedious process of running payroll, QuickBooks is giving valuable time back to business owners while also delivering confidence.

How has QuickBooks Payroll impacted your business? Tell us your story below!

Research Methodology: The Intuit Cash Flow Survey was conducted by Wakefield Research among 3,500 small business owners at companies of 0-100 employees, including 1,000 in the U.S. and 500 in the U.K., Australia, Canada, India, and Brazil, between November 1 and November 18, 2019, using an email invitation and an online survey. When reporting tracking data, quotas were set to ensure samples could be compared to data collected in 2018 in the U.S., U.K., Australia, Canada, and India.  

Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results.