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Study indicates many small businesses low on cash reserves

On Behalf of | Sep 22, 2016 | Business Formation & Litigation |

There are many things that are common among small businesses. A recent study suggests that not having much in the way of savings is one of them.

The study looked at over half a million small companies. The study analyzed bank transactions these businesses were involved in to predict how many days worth of cash reserves they had. It found that the median amount among small businesses in general was only 27 days.

Furthermore, the study found that small businesses in some industries had even lower standard levels of cash reserves. Examples of such industries are: wholesalers, personal services, construction, retail, repair/maintenance and restaurants.

Why do you think cash reserves are so low among today’s small businesses?

Not having much in the way of savings can have many effects on a small company. For one, it makes it so such a business doesn’t have much of a cushion against unexpected negative financial events.

So, in today’s economy, many small businesses can have a high vulnerability to financial shocks. Among the things that have the potential to subject a small company to such shocks are business disputes. So, it can be important for a small business to exercise great care when handling such a dispute.

When a business dispute arises for a small business owner here in Louisiana, they may want to go to a skilled attorney for guidance on what steps they can take to try to resolve the dispute in a way that protects their company’s overall and financial well-being.

Source: Bloomberg, “Most Small Businesses Are Barely Saving Any Money, New Study Shows,” Julie Verhage, Sept. 21, 2016