B2B Payments

Fundbox: Majority Of SMBs Impacted By Late Payments

Cash flow optimization company Fundbox said that a recent study it conducted found that about 64 percent of small businesses see the impact of late payments on invoices they have sent.

The findings were part of an examination of data entered through accounting and bookkeeping systems and the Fundbox platform. The study also found that some of the marquee names across large enterprises were among notable payments laggards when it came time to paying SMBs.

According to a U.S. Bank study, roughly 82 percent of small businesses actually fail due to inefficient management of cash flow. The analysis proffered by Fundbox showed that staggered and late payments decimate cash flow — about half of all net-30 invoices are paid late, with 45 percent of net-60 and 35 percent of net-90 terms not being paid on time. The result is that there is a “massive pain point” for SMBs, which shows a continued need for technologies that can help free up cash flow that is locked up in outstanding invoices.

In reference to additional findings that the study uncovered, among the large companies that have historically taken the longest to pay SMBs: McDonald’s takes 64 days on average; Target takes 48 days on average. And looking at the industries that are most overwhelmed by late payments, the top segments, according to the study, include cleaning services, accounting and bookkeeping and Web design, among others.

Drilling down to geography, Fundbox said that there are a number of states that take longer than others to pay. Topping the list is Hawaii, where the wait is 95 days on average. Then comes Iowa, with an average 63-day payment turnaround. Conversely, some states display much quicker turnaround, with Wyoming at 17 days, North Dakota at 21 days and then South Dakota at 23 days.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.