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Survey: Small businesses face late payment issues

A global poll of small- to medium-sized companies finds that late payments and “bad debt” are becoming bigger issues.

Though U.S. small and medium-sized enterprises (SMEs) suffer fewer payment-related issues compared to their global counterparts, a “significant number” face “ongoing challenges” with late payments and “bad debt,” according to the latest Global Business Monitor report – an annual survey of SMEs undertaken by cross-border financing provider Bibby Financial Services (BFS).

In trucking, it’s not unusual for it to take 30, 60 or even 90 days for freight bills to be paid, according to Jeremy Robison, president of factoring company Tetra Capital. And that’s an experience common to other small businesses in other parts of the world, Bibby’s survey found.

Bibby’s study – which polled 1,655 owners and decision makers from 11 countries – found that SMEs in France and Singapore wait more than 45 days for payment, which in the U.S. SMEs receive payment in an average of just 23 days, the shortest time frame of any country surveyed. Nevertheless, over a quarter (26%) of U.S. respondents say payments are received later than the standard 30 days expectation and 41% cited collecting payments as their biggest challenge in managing cash flow.

Additionally, in the past 12 months, a quarter of U.S. respondents to Bibby’s survey said they’ve suffered from “bad debt,” which is when they’ve been unable to recover money owed.

While that is below the global average of 33%, it is slightly higher than the 22% average reported in 2017. The average amount written off by bad debt is $73,000, said Bibby, with the largest proportion of SME’s (24%) have been unable to recover between $2,001 and $5,000.

Although one in 10 respondents said they were rejected for external financing, Bobby’s poll found more U.S. SMEs are using external finance than ever before – with 25% making use of it this year, up from 22% in 2016. While almost half (49%) believe that access to financing is excellent or good, many are put off by the challenges, citing the documentation/paperwork required (61%) as the greatest difficulty to accessing external finance.

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