WASHINGTON, April 30, 2021 /PRNewswire/ -- Almost one-third of small businesses (31%) said their main financial challenge in 2020 was declining revenue, according to new report from Clutch, the leading B2B research and reviews firm.
The data reveals that the most common financial challenge for small businesses last year was declining revenue, but that unforeseen business expenses (11%), lack of accounting tools (10%), and the challenges of receiving federal business aid (8%) were also common issues.
Experts say that small businesses should accept that financial challenges and unexpected circumstances are part of the cost of doing business.
"Businesses can never be quite sure when the cost of their raw materials will shoot through the roof, their rent will increase substantially, or crucial equipment will break down and need to be replaced," said Omer Reiner, a licensed realtor at Florida Cash Home Buyers, a real estate company. "Small businesses must be able to adapt to their ever-changing business landscape."
Finding the Right Financial Tools Can Be Challenge for Small Businesses
1 in 10 small businesses (10%) said that their main financial challenge in 2020 was lacking financial tools or expertise.
Experts say that lacking financial tools is typically a matter of misallocating resources.
"Many small businesses don't have a handle on their finances because it's not where they invest resources," said Ann Martin, director of operations at CreditDonkey, a ratings site for business finance providers. "But running payroll, doing taxes, and preparing for an audit are specialized skills."
Businesses often use accounting software to handle these specialized skills, especially QuickBooks.
Investing in the right financial tools provides small businesses the expertise necessary to effectively manage their finances.
Securing Financial Assistance From Federal Government Was Easier for Larger Businesses
Nearly half of small businesses (46%) received financial assistance or loans from the federal government in 2020.
Larger businesses, however, more commonly received federal assistance: 71% of companies with 251 to 500 employees received assistance, compared to only 30% of companies with 1 to 10 employees.
Rob Chamberlin, president of Security 101, a security company, gave 3 reasons larger companies received assistance:
- Larger businesses have bigger payrolls and needed more support.
- Larger companies were more likely to have accountants and a specialized payroll staff to complete necessary paperwork.
- Larger companies had relationships with local banks and demonstrated creditworthiness that helped to obtain loans.
In general, the government is better able to support the financial needs of larger companies.
In 2021, businesses will continue to grapple with financial challenges and consult with experts to overcome them.
Read the full report here: https://clutch.co/accounting/resources/financial-challenges
For questions about the survey or comments on the finding, contact Seamus Roddy at [email protected].
The leading B2B research, ratings, and reviews firm, Clutch connects small and medium businesses with the best-fit agencies, software, or consultants they need to tackle business challenges together and with confidence. Clutch's methodology compares business service providers and software in a specific market based on verified client reviews, services offered, work quality, and market presence.