The U.S. economy is plodding forward to more solid ground. The stock market topped 10,000 before receding back. Retail sales have continued to show gains. And though the unemployment rate is still increasing, pushing its way toward double digits, the pace has slowed noticeably. It has been a time to let some of the unease felt about the financial future of the nation to relax.
But, even though there has been plenty to be optimistic about, there has been a nagging gap in recovery between large U.S. businesses and their small- and medium-sized counterparts, as evidenced by payments trends.
When looking at the payment activities of approximately 260,000 small businesses, Cortera Inc., in its September 2009 Small Business Index (SBI), found that there is a widening disparity between the payment behaviors of large and small enterprises. According to the September SBI, small businesses are paying invoices 25% slower than a year ago and are paying at a rate 20% slower than the overall business average.
Prior to the recession, small and large businesses were paying at approximately the same rate. Now, the nation’s small businesses have a days-beyond-terms (DBT) rate 55% higher. What’s weighing more on small businesses is that larger companies have stepped up their collection initiatives against smaller companies, while at the same time, have pulled back on paying invoices.
“While the economy is steadily improving, we are still seeing numbers that show small businesses are feeling the after effects of tough terms by their larger suppliers and a tight overall credit market,” said Jim Swift, president and CEO, Cortera. “As a result, small businesses are suffering from reduced and much needed working capital—a credit crunch that impedes their ability to plan, grow, and in some cases, survive.”
Cortera has also found that geography is playing a considerable role in how companies are paying. In its October Past Due by States report, the company found that for the ninth month in a row, Nevada is the worst in paying bills on time. According to Cortera, 25.55% of Nevada-based business accounts are past due, which is 50% higher than the national average of 16.99%. Utah is a relatively close second with 24.38% past due, followed by Minnesota with 24.02%.
Of the top ten states with the slowest payment of accounts receivable, seven were west of the Rocky Mountains.
The worst part of the country for past-due accounts: the American Southwest. Of the top ten states with the latest A/R, all six states of the Southwestern region of the U.S. were listed, including being four of the top five worst states—Nevada, Utah, Colorado and Arizona.
“It’s no coincidence that states hit particularly hard by the economy, like Nevada, show the most stress when it comes to paying bills in a timely manner,” said Swift. “It is positive to note that the latest data shows a plateau in such delinquencies, suggesting that while some states may not yet be benefitting from a slow recovery, conditions don’t appear to be worsening.”
The states with lowest percentage of A/R debt past due were mainly on the East Coast. Alaska, with only 7.05% of corporate A/R beyond terms, was the top state in the country. Main, with 7.25%, was a close second, while Kansas, with only 8.50%, rounded out the top three. The rest of the top ten states for the lowest percentage of accounts beyond terms were South Dakota, Wyoming, Montana, New Hampshire, Vermont, Louisiana and West Virginia.
Matthew Carr, NACM staff writer. Follow us on Twitter @NACM_National