Big Companies are Taking Longer to Pay You

by | Accounting and Cash Management, Cash Flow Management

If you think it’s taking longer to get paid, you’re right.

Small businesses say they are being forced to wait longer to be paid on outstanding invoices – especially when dealing with larger companies.

A recent survey says that nearly two-thirds of small businesses have invoices that were unpaid for at least 60 days, and about many think the situation is getting worse.

A report released in June noted that U.S. businesses paid their first-quarter invoices about 7 ½ days after the due date. That’s a 14% increase over the same period last year.

The Main Offenders

While companies of all sizes were guilty of stringing-out vendors, the biggest offenders were among the smallest and largest firms.

The very smallest companies, those with 1 to 4 employees, were almost 9 days late paying their invoices. That’s understandable, as cash flow concerns are almost expected from start-ups and very small firms.

At the other end of the spectrum, the largest companies, those with 1,000 or more workers, were an average of almost 8 days late in paying. And the trend is disturbing – that’s up nearly two days, over last year.

The Impact

The longer wait is particularly tough on small companies, who might be forced to borrow at expensive rates to fill the gaps in their cash flow.

The slow payments can prevent smaller companies from making investments in research, new employees, better equipment upgrades, and other things that can benefit the company in the long term. Slow payments slow growth…and the consequences of slow growth – postponed hiring and cancelled orders for materials and equipment – spread through the economy.

But Why?

Why do big companies take so long to pay?

Maybe because they can?

Seriously, much of it might have to do with the nature of the big company / small company dynamic. One report was very blunt, stating, “large firms often take advantage of their market power to strong-arm small-business suppliers and customers.”

What to Do

You can’t control business trends, but you can adjust your company’s plans for coping with slow payers. To get a better handle on your receivables consider the following:

  • Provide incentives for customers to pay you quickly. This can be beneficial for you both.  Offering a discount to customers who pay immediately or within a short time of getting your invoice can dramatically speed up receivables and maybe even build some goodwill.
  •  Target larger invoices for on-time payment, especially when you know that you have your own near-term bills that have to be paid. A polite call to your customer’s accounts payable department is always okay. So is “calling in a favor” and asking for slightly faster payment, if your relationship with the customer is good.
  • New accounts should always be required to provide business references and you should always conduct a credit check. This can potentially prevent a lot of trouble later.

How Invoice Factoring Can Help

An invoice factoring program with MP Star Financial can provide cash you need to meet your needs – even when dealing with of slow-paying customers.

It’s easy to set up, and once you’re established you can usually be paid on your invoices the same business day.

MP Star Financial can help you get paid faster! Call for more information. (800) 833-3765, extension 150.

Let's Talk

For more specifics about invoice factoring, visit MP Star Financial online or schedule time to talk with a representative. Don’t wait 30 to 45 days for payment. MP Star can get funds to your account faster. Call MP Star Financial today at (877) 292-1904, extension 150.