Previously, I said that collecting your payment (cash or check) isn’t getting easier these days—having slower cash flow is a story that belongs to every business. Everyone falls behind to pay. Well that was a rough sense of mine. But, hey, Dun & Bradstreet say the same. While the economic outlook was a bit rosier, according to a new Dun & Bradstreet report, business delinquency rates are actually up compared with last year.
So again, you are not alone. In fact, businesses report that the percentage of dollars they owe that are more than 90 days past due is only slightly lower than it was at the peak of the recession.
Oh yea, you’re right. The payment slow down could be part of big players’ strategic financing mechanism, CFO.com writes. According to D&B, the percentage of companies with more than 50 employees that reported they were paying late increased for all size categories between April 2010 and March 2011, generally by 3% to 5%.
While larger businesses historically take longer to pay, now “some large corporations are telling suppliers it will be 90 days and even 120 days until they’ll see payment,” compared with standard 30-day terms, says Ernie Brown of Financial Manager’s Resource, as it is cited by CFO.com
Even though smaller firms get less slack from their vendors, they are also more concerned with paying on time as they face harsher consequences for late payments, including worsening credit ratings. Small businesses are in fact improving their payment rates. According to D&B, the percentage of firms with fewer than 50 employees that reported late balances decreased about 4% between spring 2010 and spring 2011.
As for the industry category, the highest delinquency rates for the first quarter were manufacturing, telecommunications, and automotive. Real estate, natural resources, and insurance were the industries with the lowest delinquency rates, according to D&B.
In this situation, chasing customers for on time payment is always a good idea. And taking care of your own company debt is equally important, in other side. Be prepared to negotiate it. Your vendor may start calling your for on time payment too. (Ref: CFO.com)