- Why Do Small Businesses Struggle With Cash Flow?
- Is My Bookkeeping Causing My Cash Flow Problems?
- How Does Poor Bookkeeping Hurt Cash Flow?
- What Can Good Bookkeeping Do for You?
- Case Study: Erin’s Cash Flow Turnaround
- How to Fix Cash Flow Problems with Better Bookkeeping
- Why DIY Isn’t Always the Best Route
- Final Thoughts: Bookkeeping Is Cash Flow Control
- ✅ Ready to get your cash flow under control?
Struggling With Cash Flow? Your Bookkeeping May Be to Blame
If your small business is constantly short on cash, your bookkeeping—or lack of it—could be the hidden issue. If you have a new small business, more often than not, your business will be struggle with cash flow at some point. In this article, we break down what signs to look for, and how to fix it with smart systems that save money and reduce stress. Equipped with this knowledge, we hope you can improve cash flow for your business with smart bookkeeping practices.
Why Do Small Businesses Struggle With Cash Flow?
Running out of cash doesn’t always mean you’re not earning enough. It often means you’re not managing what you earn appropriately. In fact, 82% of small businesses fail because of poor cash flow management, not lack of revenue.
A lot of small business owners may extend favorable payment plans to customers in an effort to retain those customers for repeat business. This is seen as a cost of doing business a lot of times, and it can be very effective at retaining customers.
However, the business owner has to be very careful not to have an exceedingly high amount of cash tied up in accounts receivables. They have to constantly check their receivables and ensure invoices are not being left uncollected for too long as that will negatively affect their cash flow. One of the reports we review with our customers is their Aged Receivables report to ensure invoices are being updated regularly.
A recent QuickBooks survey found that 60% of U.S. small business owners face recurring cash flow problems. In Canada, 42% of business owners still use spreadsheets or paper to manage money, making it easy to lose track of where funds are going.
If you’re feeling the squeeze, you’re not alone. And the solution isn’t just “earn more”. it’s “understand more.”
Is My Bookkeeping Causing My Cash Flow Problems?
The short answer: very likely.
Here’s why:
- 43% of Canadian and 50% of U.S. business owners report money problems tied to not fully understanding their finances.
- Many owners miss out on $100,000+ in potential profit due to poor financial tracking.
- If you’re doing your own books and relying on manual methods, you could be misjudging how much money you really have.
Bookkeeping isn’t just record-keeping—it’s decision-making fuel. And bad data leads to bad decisions.
How Does Poor Bookkeeping Hurt Cash Flow?
If your bookkeeping is behind, messy, or nonexistent, it creates blind spots that can sink your business.
Here are the common symptoms of poor bookkeeping:
- Late invoicing and no follow-up = money stuck in limbo
- Overlooking expenses = slow leaks that drain profit
- No forecasting = no warning before cash runs out
- Tax surprises = panic payments and penalties
- No emergency buffer = one bad month leads to panic
You may think you’re breaking even—but without clear reports, you’re guessing.
What Can Good Bookkeeping Do for You?
Smart bookkeeping isn’t just for tax time—it keeps your business breathing. Here’s what it can help you do:
In one study, Canadian businesses using cloud-based tools (QBO, Wave, Xero) saw more time savings, better reporting, and lower stress.
Case Study: Erin’s Cash Flow Turnaround
Erin, a solo marketing consultant in Vancouver, had steady clients but was always running out of cash in her business account. Her invoicing was manual, expenses tracked in a spreadsheet, and taxes? A nightmare.
After struggling with cash flow for a while, Erin decided to take action and smarten up her bookkeeping. She started working with a part-time bookkeeper who set up cloud accounting software and established best practices for her. With their help, Erin:
“I used to think cash flow was just about getting paid faster. Turns out, it’s about understanding your numbers.”
How to Fix Cash Flow Problems with Better Bookkeeping
Here’s how to start fixing your cash flow today:
- Use accounting software (like QuickBooks, Xero, or Wave)
- Track income and expenses weekly
- Send invoices as soon as work is done
- Create a basic monthly cash flow forecast
- Set aside 15–30% for taxes (A lot of our customers like the profit-first method!)
- Cut subscriptions or costs you don’t use
- Review your reports monthly (We build the habit of reviewing financial reports with our customers on a monthly basis)
Why DIY Isn’t Always the Best Route
When you’re a solo entrepreneur or running a 2–5 person team, you don’t have time to mess around with spreadsheets and receipts. That’s time you could spend on sales, service, or strategy.
Hiring a bookkeeper:
- Saves time and stress
- Gives you real financial insights
- Helps you stay ahead of tax season
- Keeps your cash flow steady, not spiky
Not convinced yet? Learn more about the many benefits of having your business bookkeeping managed by a professional in this in-depth article: HERE
Final Thoughts: Bookkeeping Is Cash Flow Control
If you’re struggling with cash flow, the answer may not always be to work harder. You need to get your books in order instead. Most small business cash flow problems are preventable with clear, consistent bookkeeping.
At Sumwise, we help solo and small business owners fix their books, improve cash flow, and regain control. Whether you’re drowning in receipts/invoices or just starting out, we can help.
