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Big US Companies Take Longer To Pay Invoices Despite Recovery

Big US Companies Take Longer To Pay Invoices Despite Recovery

June 08, 2021 at 03:40AM
by PYMNTS

Even though the U.S. economy is beginning to recover from the pandemic, some companies still aren’t paying suppliers on time, The Wall Street Journal (WSJ) reported.

Large U.S. companies took around 58 days on average to pay suppliers in the first quarter of 2021, according to WSJ. That’s a 5.5 percent increase from 55 days last year.

In fiscal year 2020, companies took 62 days on average to settle dues with suppliers, WSJ reported. That was a 7.6 percent rise from 2019.

The trend of companies postponing their due dates for bills is typically based on their need to have more cash available to keep their businesses running. The pandemic has made having access to more cash a dire issue.

“Term extensions have not gone away,” Craig Bailey, an associate principal at The Hackett Group, told WSJ.

The term extensions have been especially pronounced among industries hit hard by the pandemic like retail, according to WSJ. Some companies are especially cautious because of the ways COVID-19 affected customer spending patterns, making forecasting demand more difficult.

Another method used to help delay payment dates amid companies has been supply chain finance, which sees companies working with banks to provide early funding to suppliers at a discount, WSJ reported. The companies pay the bank in full later.

Some companies, however, including defense giant Lockheed Martin and chip manufacturer Micron Technology, have done the opposite and paid early to make sure suppliers are OK, according to WSJ.

Late payments have been a problem, especially for small- to medium-sized businesses (SMBs). PYMNTS reported that many SMBs have reported delays in payments, causing them to consider cutting employee hours or putting a freeze on hiring or buying inventory.

Around half of SMB owners said they think a “sizable” interest charge should be applied if payments are made late. But those companies said if they were to receive payments earlier, they would invest in expanding their businesses or repaying loans.