4 Cash Flow Issues to Monitor in 2025

Effectively handling how money moves in and out of business is important for keeping it going strong. It affects how much money the business makes, how flexible it can be, and how healthy its finances are overall. In the United States, for example, 20% of small businesses don’t make it through their first year. And the odds get worse over time, with more businesses closing down by the second and fifth years.

This shows just how important it is for businesses to be really good at managing their cash flow if they want to stick around and do well in the long run. 

4 Important Cash Flow Issues to Monitor in 2025

1. Issues with Managing Cash Flow

Managing cash flow involves predicting how much money will come in and go out of a business and deciding how to use that money wisely. To do this well, companies need to accurately guess how much money they'll make and spend in the future. This is easier when the economy is steady, but unexpected events can quickly change things. When the market is tough, businesses often rely on the money saved to stay afloat.

Out of every 400,000 businesses that start each year, half won't make it past five years. One big reason for this is not handling their money well. In fact, 82% of failed businesses say this is one of the main reasons.

2. Ignoring the Importance of Cash Flow Forecasting

Cash flow forecasting helps companies predict how much money will flow in and out of their business over a certain time. It's essential for managing finances and making decisions about funding, spending, and investments.

Companies can forecast cash flow for different periods:

• Short-term forecasts cover about a month and help identify immediate funding needs or extra cash.

• Medium-term forecasts look ahead between a month and a year.

• Long-term forecasts project cash flow for up to five years or more. However, the longer the forecast, the less precise it tends to be due to unexpected changes.

Why it’s Important to Forecast Your Cash Flow?

• It shows you how much money you expect to come in and go out over a certain time, like months or quarters. This helps you plan for the short and long term.

• It helps you decide if you can afford to do things like start new projects, hire people, or grow your business.

• It lets you spot any times when you won't have enough cash. If you see these gaps early, you can do things to fix them, like getting a loan or cutting spending.

3. Implementing Cloud-Based Accounting Systems

Thanks to Artificial Intelligence (AI) and automated finance tools, many accountants now use cloud-based accounting.

Nearly all 94% of accountants have made the switch, with a majority (67%) preferring it over older methods.  Yet, 60% of small business owners admit they lack financial know-how. Surprisingly, only a small fraction of 14% think accountants could help them save more on taxes. Hiring an accountant can also be expensive for small businesses, ranging from $20 to $100 per hour.

Jason Carlson, CFO of Mood Media, emphasizes the importance of digital transformation. He notes that timely payments are essential for maintaining operations, particularly for SMBs that lack financial reserves. He points out that outdated payment systems often cause unnecessary errors and inefficiencies. His advice? Look into digital options like direct debit and credit card payments, and partner with banks that offer services designed specifically for your needs.

4. Late Payments Lead to Overdraft Dependence

Small businesses need to keep their money flowing smoothly by handling their finances well and staying on top of Accounts Receivable (AR). This means they need to keep track of the bills they send to customers and make sure they get paid on time.

Late-paying customers are a challenge no business can escape. But with slower economic growth and rising costs, this issue feels bigger than ever—and it’s something businesses can’t afford to ignore.  

A recent global study by Allianz Trade shows that average days sales outstanding (DSO)—the time it takes to get paid after making a sale—went up by three days in 2023, hitting 59 days. Even worse, one in five companies is waiting over 90 days to get paid on a typical invoice.

Quickbooks did a study called The State of Small Business Cash Flow all around the world. They looked at how money moves in businesses run by one person or a few people.

Their study found:

• 34% of SME business owners experiencing late payments say they have to rely on overdrafts to help them meet their monthly obligations.

• 1 out of every 7 small business owners couldn't pay their workers because they didn't have enough money at the right time. In the UK, this means about 2.2 million people didn't get paid on time.

• 38% of small business owners who had money problems couldn't pay back what they owed.

• On average, small business owners lost about £26,000 because they had to say no to jobs when they didn't have enough money.

Staying Flexible Amid Market Shifts

Succeeding in business now means staying informed and flexible. No matter how much things change, keeping your cash flow in check is always key. For small and medium businesses to thrive in a tough market, they need to embrace new ideas. Using financial technology (fintech) in cash flow management gives them an advantage by making them more nimble and able to react quickly to market shifts.