- Over a quarter of SMEs do not receive payment within the standard 30 days expectation
- 34 percent of SMEs say bad debt is affecting growth and profits for SMEs
- 25 percent of SMEs are using external financing, up from last year
Though U.S. small and medium-sized enterprises (SMEs) wait fewer days for payment and are less likely to suffer from bad debt than their counterparts in other countries, a significant number face ongoing challenges with late payments and growing 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).
The study surveyed SME owners and decision makers from 11 countries including the U.S., Canada, the Czech Republic, France, Germany, Hong Kong, the Republic of Ireland, the Netherlands, Poland, Singapore and the UK.
While SMEs in France and Singapore wait more than 45 days for payment, U.S. SMEs receive payment in an average of just 23 days, the shortest timeframe 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% cite collecting payments as their biggest challenge in managing cashflow.
Additionally, in the past 12 months a quarter of U.S. respondents have suffered from bad debt, where they have been unable to recover money owed. While that is below the global average (33%), it is slightly higher than reported in 2017 (22%). The average amount written off by bad debt is $73,000, which for SMEs can cause business concern if not address. The highest proportion of SME’s (24%) have been unable to recover between $2,001 - $5,000, money that could have been used to cover some business expenses for a SME.
To address these challenges, BFS recently published a guide, Get Paid On Time: How to Protect Your Business Against Late Payments, on how SMEs can find alternative ways to protect themselves from the impacts of unpaid invoices and outlining solutions SMEs can take to increase their cashflow.
Ian Watson, CEO North America, Bibby Financial Services said: “In the U.S., our survey results find that too many SMEs are being held back by inconsistent payment schedules, limiting cashflow and disrupting the health of their businesses. Many of these businesses could benefit from factoring accounts receivables and asset based borrowing as alternative solutions to mitigate the impact of late payments. A good provider can also assist SMEs in minimizing bad debt risks by understanding their customer base and helping them better manage payment terms and collections.”
Although one in ten respondents have been rejected for external financing, the survey finds that more U.S. small and medium-sized enterprises (SMEs) are using external finance, with 25 percent making use of it this year, up from 22 percent in 2016. While 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.
Watson added: “Many SMEs find the process for obtaining external financing daunting and are not aware of the alternative financing solutions available to them, which speaks to the importance of a relationship-based approach and working with a provider who understands their business, customers and challenges and can tailor solutions to their unique needs.”
About Bibby Financial Services
Bibby Financial Services is a leading independent financial services partner to more than 10,250 businesses worldwide providing more than $1.25 billion in funding annually and handling $11.6 billion in annual client turnover globally. With over 44 operations in 13 countries spanning Europe, North America and Asia, we provide asset-based lending and factoring solutions to help businesses grow in domestic and international markets. Established in 2001, Bibby Financial Services North America has seven offices in the U.S. and Canada that support businesses in virtually any industry. We hold memberships in the Commercial Finance Association, the International Factoring Association, and the American Finance Association. Bibby Financial Services is part of Bibby Line Group (BLG), a diverse and forward-looking family business with over 200 years’ experience of providing personal, responsive and flexible customer solutions. To find out more about Bibby USA and Bibby Canada, please visit www.bibbyusa.com or www.bibbycanada.ca.