Citing increased liquidity and plans for expansion, small businesses started 2012 off on the right foot, according to a quarterly index from Capital One.

Four out of five small businesses said their companies met their financial expectations for the quarter, with more businesses reporting better financial performance than a year ago. However, the survey of nearly 2,000 business owners indicated that most are still concerned about cash flow and filling open job positions.

Still, 39 percent said the economic condition of their businesses is improving, with 43 percent claiming they are holding steady and only 18 percent reporting a decline. A quarter of businesses have plans plan to increase business development and investments, while only 12 percent have plans to cut spending, a drop of three points since the last quarter of 2011.

When asked about business optimism, those working in industrial production sectors like mining, construction and manufacturing reported a higher average score than other industries, recording a 6.4 out of a scale of 10, with 10 being most optimistic. Of the factors that most affect business, respondents ranked cash flow highest, followed by fuel prices, competitive activity, customer payments, price margins and interest rates.

Still, 45 percent of business owners said the ability to acquire new customers remains their biggest challenge. In order to tackle this, a third said they are intent on maintaining existing customers, while nearly 25 percent said they are looking to identify new revenue streams to fill the gap.

"The latest survey results show some positive signs that more small businesses are beginning to focus on hiring, with the increase in the number of small businesses making plans to hire compared to the previous quarter at the highest level in over two years," Jon Witter, president of direct, consumer and small business at Capital One, said in a statement.

One in three small businesses plan to hire in the next six months, while 15 percent currently have job openings. Of the sectors with open positions, businesses within the government, utilities and mining industries reported the most difficulty to fill positions, while the construction, wholesale and finance sectors were fairing better.