Small businesses in the United States experienced a significant turnaround in performance during the third quarter of September 2024, marking the first positive sales growth since late 2022. This encouraging trend, revealed by recent data, highlights a decrease in late payments and shorter average payment times, suggesting a more stable financial landscape for small businesses.
Key Insights: Sales Growth and Payment Improvements
Sales among small businesses rose by 0.8% year-over-year in the three months ending in September, a reversal from the 0.1% decline seen in the preceding quarter. Additionally, businesses benefitted from enhanced payment timelines:
- Late payments dropped, with businesses receiving payments an average of 9.1 days late, showing a 0.5-day improvement compared to the June quarter.
- The average time to receive payment fell to 28.7 days, decreasing by 0.7 days, and remaining consistent within the 28.5 to 29.5-day range since early 2023.
Regional Performance Variations
All major US regions reported sales growth in the September quarter, though the pace varied:
- Northeast: 1.3% year-over-year growth
- West: 0.8% year-over-year growth
- South: 0.6% year-over-year growth
- Midwest: 0.2% year-over-year growth
While the West region maintained a streak of three consecutive quarters with sales growth, the payment timelines showed disparities:
- Improved payment times: South (down 1.8 days to 28.5 days) and Midwest (down 0.3 days to 30.0 days)
- Extended payment times: Northeast (up 1.3 days to 29.0 days) and West (up 0.5 days to 28.2 days)
The upward trend in small business performance is a welcome sign following nearly two years of challenging market conditions. Positive sales figures and reduced payment lags indicate that economic pressures may be beginning to ease, prompting businesses to prioritize strategies that encourage timely customer payments to enhance cash flow and resilience.
Outlook for 2025: Optimism Amid Challenges
A November 2024 survey showed that 88% of US small business owners expressed heightened optimism about their business prospects for 2025, the highest level recorded among similar surveys in other countries. This improved sentiment is attributed to lower inflation rates and several Federal Reserve interest rate cuts since September 2024, alleviating pressures on cash flow and profitability.
However, recent trade policy decisions have introduced new challenges. Tariffs imposed on Canadian goods and subsequent retaliatory trade actions have disrupted cross-border supply chains, leading to increased operational costs for businesses reliant on US-Canada trade. These developments pose a threat to the growing optimism among small businesses, as both sides of the border face elevated costs that may impact intertwined supply chains and business operations.
Preparing for a Dynamic Business Environment
As financial pressures appear to ease, experts encourage small businesses to brace for ongoing volatility. While potential economic policy changes may alter the business environment, small enterprises must address persistent challenges such as cash flow disruptions and delayed payments. To thrive amid these evolving circumstances, businesses should focus on financial resilience by embracing strategic planning, operational efficiency, and proactive cash flow management.
