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Overdue invoices are piling up for small businesses in the United States

A survey of 1,000 small businesses in the United States by Melio and YouGov highlights that more than half of them experienced late payments from large companies, which significantly impacted their business, delayed hiring, and reduced their ability to recover from the pandemic.

They believe large customers are deliberately delaying payments, which is leading to higher interest costs as they have to borrow money to keep their business running.

Want to know more about this topic? Listen to RIABU's Simon Littlewood and Mark Laudi discuss this issue on our podcast, Be First In Line To Get Paid:

About 47% of the small businesses say late payments by large firms have gotten worse due to the pandemic. Worryingly, 30% believe that late payments are affecting their ability to keep their business open.

The survey also revealed late payments caused 40% of small businesses to postpone hiring, 39% delayed purchasing their inventory, and 36% reduced their employee hours.

While the survey found that most US small businesses have 30 days payment terms, many of them experienced late payments well past the due date, with a quarter having to wait between 20-30 days past the payment due date.

The results indicate that late payments are a persistent dilemma for small businesses, affecting their ability to maintain steady cash flow, offer employment, and invest for the future.

The United States has some 31.7 million small business firms, and they account for 44% of US economic activity or about US$9.7 trillion, and the success of these businesses is key to keeping the economy stronger.

Small businesses need to concentrate on internal invoicing procedures and maintaining client relationships which are vital to success in the current environment where overdue invoices may continue to pile up.

When they are first having conversations with potential or existing clients, they should discuss billing and payment terms. By doing this, any uncertainty regarding the payment procedures and expectations is eliminated.

If businesses don't articulate these expectations early, customers won’t bother paying you on time, simply because businesses haven’t asked for it.

When small businesses pursue the eight aspects of the Virtuous Revenue Cycle discussed in our book Let the Cash Flow, they will be way ahead of their competitors in terms of ensuring that they get paid on time.

Get more tips on effective cash flow management from our book, Let the Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com

Topics

  • Business enterprise, General

Categories

  • riabu
  • invoice
  • accounts receivable
  • balance sheet
  • business owners
  • cash flow
  • risk
  • smes
  • late payments
  • sme

Contacts

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