Small Firms Waiting Longer to Collect Bills
Small businesses have resorted to taking out loans because large customers are not fulfilling their invoices on time.
Having trouble getting paid by big clients? You’ve got company.
During the recession, big companies began taking longer to pay vendors for work, the Wall Street Journal reports. But even as the economy has begun to recover, the trend has continued, leaving small businesses having to borrow at costly rates in order to compensate for the lack of cash flow, the paper explains.
Many small businesses told the Journal that large clients are now taking up to 90 days to pay an invoice after it’s issued.
Of the 850 small businesses surveyed by the National Federation of Independent Business last year, 64% reported that some invoices went unpaid for at least 60 days, and 20% said delinquency rates were increasing.
Other research shows that bigger companies are the biggest contributors to this problem.
The Journal cited a study from global information services company Experian that showed on average, businesses were paying bills 7.6 days past due in spring 2012, a 14.1% increase from the year before. Companies with more 1,000 employees, however, had increased their time to pay by nearly 28%, almost double the increase across all businesses, the paper reported.
The continued squeeze can cause problems for the broader economy as well, as small businesses have little money to invest in research and development or hire new employees, the Journal says. –John McDermott
Photo via Flickr user EU Social