Surviving as a small business was challenging even before the coronavirus pandemic, with only about half of small businesses keeping their doors open for at least five years and only about a third lasting 10 years.

The pandemic has worsened already challenging conditions, per a recent Small Business Pulse Survey by the U.S. Census Bureau, which gauges the impact of the pandemic on small businesses.

Only 28% reported they had enough cash on hand to operate for three months. And nearly 50% expected it would take more than six months for business to return to the level it was at a year ago. Nearly 80% have requested Paycheck Protection Program (PPP) loans.

Every four years, the National Federation of Independent Businesses (NFIB) surveys small businesses as part of its Problems and Priorities Survey. It just released its 2020 results, collected right before the U.S. economy really began feeling the impact of the coronavirus. Results point to some prominent problems—such as financing—that will likely worsen post-pandemic. Other issues include customer loss, the cost of health insurance and finding qualified employees.

5 Common Financial Problems that Small Businesses Face

1. Loss of Customers

Customer retention is a perennial concern, and tracking retention and churn rates is a good way to measure the effectiveness of different tactics to minimize customer loss. Mixpanel analyzed anonymized data from 1.3 billion users to come up with benchmarks for customer retention and found the average eight-week retention rate across industries is 20%.

To calculate retention rate, take the number of customers at the end of a certain period and subtract the number of customers acquired during that period. Then divide that number by the number of customers at the start of the period, and multiply that by 100 for a percentage.

Small changes in retention rate can make a big difference in profits. An oft-quoted Bain & Company statistic says that by increasing customer retention rate by 5%, a business can increase its profits by 25-95%

To increase customer retention, look at ways to increase customer loyalty, as the cost of acquiring new customers is much higher than keeping existing ones. Tactics include instituting loyalty programs, offering customers exclusive discounts and developing easy ways to solicit feedback from customers. Make sure you’re connecting with clients frequently so you can address any concerns quickly.

2. Pressure from Credit Sources

The most common source of capital to finance business expansion is personal and family savings, followed by using the business’s profits and assets, getting business loans from financial institutions and obtaining business credit cards.

The Federal Reserve Banks’ Small Business Credit Survey (SBCS) shows that securing credit and making payments on debt are the second- and third-biggest financial challenges, behind paying operating expenses (including payroll). The most common types of external financing for small businesses are loans and lines of credit.

In that same survey, small businesses owners reported they most often use a personal guarantee to receive financing, with 88% relying on an owner’s personal credit score. Additionally, 86% of firms said they would need to find new funding or reduce costs if their business didn’t see revenue for two months. In that scenario, 46% of companies that had applied for financing in the past 12 months would likely take out additional debt.

What’s more, some 40% of firms surveyed by the SBCS were already holding outstanding debt of up to $100,000. And that’s before the pandemic hit.

One of the major ways small businesses have been able to protect jobs is with cash influxes from the PPP, loans that the government will forgive as long as certain conditions are met. While there is no data on the companies that applied for loans under $150,000, data from the Small Business Administration said PPP loans have supported 51.1 million jobs, or up to 84% of all small business employees. The average PPP loan was for $107,000, and 85.6% of all loans were for less than $150,000.

One way small businesses can ensure they don’t take on more debt from this program than expected is to diligently and accurately track expenses covered by the loans, so they have the documentation to prove where they spent the money.

3. Repeated Loan Refinancing

Another way businesses may look for cash is by refinancing loans.

When the business took out its first loan, the terms may not have been as favorable as they are when the organization has been making money for a few years. For business owners who have improved their credit scores, increased revenue or increased the value of assets, LendingTree says refinancing a loan may be a good idea. Rates could be more favorable and payments will be lower, which means more cash the business can use.

It’s no wonder, then, that the Federal Reserve’s SBCS survey revealed 30% of those seeking financing are doing so to refinance or pay down debt, with most seeking amounts between $50,000 and $100,000.

While refinancing is a common practice, doing so to cover operating expenses could signal trouble. If a small business owner used their own credit score to secure a loan, refinancing debt will lower that person’s credit score, possibly affecting their personal financial standing. Small business owners also need to consider whether there are penalties for paying off the old loan early. If those penalties outweigh the benefits of refinancing, it’s not a good idea.

While a borrower may refinance in order to shorten the loan term, this is unlikely to be the case if the goal is to reduce monthly expenses. The benefits of a lower interest rate are partially offset by an increase in total debt, as refinancing fees are often added to the total owed. Depending on the size of the debt, how much lower the new interest rate is and the company’s objectives, refinancing will likely extend the duration of a loan, or at best retain the current payment schedule.

4. Human Capital and Staffing Issues

This month’s NFIB Jobs Report showed 33% of businesses have at least one unfilled position, up three points from the previous month. Pre-coronavirus, small businesses said finding qualified labor was a top challenge in the NFIB’s Problems and Priorities survey. This was especially true in the construction and manufacturing industries.

The biggest related problem small businesses have—and have identified as their top financial challenge for decades—is the cost of health insurance. It was No. 1 across every industry in the NFIB survey, which noted insurance costs have risen 43% over the last decade, outpacing both inflation and wages. Small businesses struggle to provide the health care packages larger businesses can and have resorted to shifting more of the costs to employees.

Generally, an individual will stay with an organization if the pay, working conditions and developmental opportunities are equal to or greater than the contributions (e.g., time and effort) required of the employee, per the Society of Human Resources Management (SHRM). Therefore, health insurance is a huge motivator in employee retention. Small businesses looking to control costs can negotiate for lower rates, shift to individual plans or look for plans on the Small Business Health Options (SHOP) exchange.

5. Poor Work Environment

SHRM says one in five Americans departed a job in the past five years because of poor company culture, and it estimates that turnover cost businesses a grand total of $223 billion—the most important factor to a strong company culture is the employee’s manager, followed by meaningful work and flexibility, commute times and professional development.

A “poor work environment” can also refer to one that is physically unsafe or enables harassment. Small businesses must be mindful of Occupational Safety and Health Administration (OSHA) requirements that organizations with 10 employees or more must follow. Adopting an effective safety and health program can save $4-6 for every $1 invested.

And employees can feel unsafe in their work environment for other reasons. According to the Equal Employment Opportunity Commission (EEOC), retaliation continued to be the most common charge filed with the agency, followed by discrimination based on  disability, race and sex. The EEOC shares tips for preventing and handling common workplace issues, which can be costly to small businesses.

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How Financial and Accounting Software Can Help Solve Financial Problems

In preventing all of the above issues—or catching them before they become bigger problems—the organization needs to see and understand how cash is moving in and out of the business, and have total confidence in those numbers.

Accounting software gives companies visibility into all their revenue and expenses and allows them to track and analyze key financial metrics over time. Additionally, this software can automate accounts receivable processes to help reduce days sales outstanding and increase cash flow. It also helps business track bills and make the most of their payment terms to optimize accounts payable management, all while maintaining strong relationships with key suppliers. Finally, accounting software makes it easier for companies to provide financial statements and other essential information required to secure financing—or qualify for PPP loan forgiveness, to use a current example.

Having automated accounting processes also helps small business hold on to a very important part of their team—those in the finance organization. Robert Half’s 2020 Salary Guide said demand is high and supply is low for accounting and finance professionals in the U.S. Companies are holding on to good people by providing better pay, perks and advancement opportunities than competitors. With many mundane accounting tasks automated, accounting and finance team members can refine other skills, such as critical thinking and communication. And with a cloud-based accounting system, they can further improve on one of the most in-demand technology skills for accountants: proficiency with cloud-based systems.