Dealing with cash flow strain in a struggling economy, big business is taking longer to pay on invoices.
The average time to pay bills is up 5% to 55.8 days for companies with sales over $5 billion, as reported by the Wall Street Journal in Big Firms Are Quick to Collect, Slow to Pay.
On the flip side these same big firms are stepping up efforts to collect on invoices, shortening the number of days to receive payment from customers.
So who is getting stepped on? You guessed it…the little guys.
The report goes on to reveal that small to mid-size businesses with less than $500 million in sales are feeling the squeeze from both sides. The time it took smaller companies to collect on payments went from 54.4 days last year to almost 59 days in 2009. That’s about an 8% increase in time to receive money while simultaneously the time to pay their vendors decreased about 6.5% to 40.1 days.
What is good cash flow management for the big guys is turning into a nightmare for small business. Imagine having to wait 120 days for payments from a large customer that used to pay in 30 days, a policy implemented by Anheuser-Busch Co. earlier this year.
All across America it is taking small business longer to receive payment on accounts receivable while trying to meet demands for faster payment on invoices they owe. To meet cash flow a business often turns to credit lines and bank loans, but these are more difficult than ever to access during the credit crunch.
The search for alternative solutions is creating an increased demand for accounts receivable financing. Also known as factoring, a business can receive an upfront cash advance on outstanding invoices. This influx of cash can be used to meet payroll, pay bills, or fund growth, even when banks turn a business down.
Entrepreneurs and businesses interested in making money with factoring can learn more with the Small Factor Series, a proven yet affordable how-to system by Jeff Callender.
Author: Article Written by Tracy Z. Rewey
Source: Analysis performed by REL Consultancy for the Wall Street Journal as reported in Big Firms are Quick to Collect, Slow to Pay, August 31,2009. To read the WSJ article visit: http://online.wsj.com/article/SB125167116756270697.html