Payment Delays Are a Top Concern For Small Businesses In The U.S.

A new survey of small and medium-sized businesses in the United States has found that late payments and invoicing are among the top concerns for CEOs and CFOs in 2022. The survey, conducted by the National Association of Manufacturers (NAM), polled 942 executives across various industries.

According to the survey, 22 percent of respondents said that late payments were their top concern, while 19 percent said invoicing was their top concern. Other problems included working capital (18 percent), cash flow (16 percent), and business financing (15 percent).

The survey also found that the vast majority of respondents (93 percent) believe that late payments harm their business, including 61 percent who say that late payments have a "significant" or "very significant" adverse impact. Only 7 percent of respondents said late payments do not affect their business. When asked about the implications of invoicing, 87 percent of respondents said it harms their business, including 58 percent who believe that invoicing has a "significant" or "very significant" adverse effect.?

Late Payments Consistently Rank as a Top Issue For Small Businesses in The U.S.?

Late payments have been identified as a top issue for small businesses in the United States. A 2016 American Express OPENSmall Business Monitor survey found that late payments were the second most commonly cited challenge for small businesses after only attracting new customers. In that survey, 26 percent of respondents said that late payments were a "serious" or "severe" challenge for their business.?

A 2017 survey by CNBC and SurveyMonkey found that 38 percent of small business owners said that late payments were a significant problem for their business, while 31 percent said they had struggled to pay their bills on time in the past year due to cash flow problems.?

In 2018, another survey by American Express found that 36 percent of small businesses in the United States had been affected by late payments in the previous 12 months. That survey also found that 25 percent of small companies had to borrow money to cover expenses due to cash flow issues stemming from late payments.?

These surveys all paint a consistent picture: Late payments are a significant problem for small businesses in the United States, and they are struggling to manage their cash flow.?

Impact of Late Payments on Small Businesses?

The NAM survey findings make it clear that CEOs and CFOs believe late payments harm their business, but what does that mean? Late payment can have several consequences for small businesses, including:?

- Decreased cash flow: When your customers don't pay you on time, it can strain your cash flow and make it challenging to cover your expenses or invest in growth opportunities.?

- Reduced profit margins: To manage our cash flow challenges, many small businesses are forced to extend terms to their suppliers, which can eat into profits.?

-Increased borrowing costs: When you have to borrow money to cover expenses due to late payments, you may end up paying higher interest rates or fees.?

-negative effect on employee morale: Your employees may feel stressed and overworked if they see your company struggling to make ends meet due to payment delays.?

These are just some of how late payments can negatively impact your small business. If you're concerned about payment delays affecting your business, there are steps you can take to mitigate the risk, including:?

- Offering discounts for early payment: You can incentivize customers to pay their invoices on time by offering them discounts for early payment. This can help improve your cash flow without wasting your profits.?

- Extending terms cautiously: If you need to extend terms to customers, be sure to do so carefully and only offer terms you're confident you can afford without putting your business at risk.?

- Diversifying your customer base: Don't put all your eggs in one basket by relying on just one or two customers for most of your revenue; instead, try to diversify your customer base, so you're not as reliant on any single customer's payment timing."??

Late payments are consistently ranked as one of the top issues facing small businesses in America today—and with good reason! Late payments can significantly negatively impact your business's cash flow and profit margins, not to mention employee morale. If you're concerned about payment delays affecting your business," there are steps you can take to mitigate the risk, including offering discounts for early payment, extending terms cautiously, and diversifying your customer base.

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