We are noticing an increase in the time it takes for large corporations to pay their invoices to our team. Fortune 500 companies tend to pay their suppliers more slowly, which will hurt small businesses in America, which are already tied up. These same small businesses employ 2/3 of the population and do a great service by catering to the needs of corporations.
At the company I run, The Car Wash Guys, they have both retail and fleet clients. Retailers pay in cash, which tends to offset problems with prolonged late payments on fleet accounts. It appears that corporations are holding onto their cash to keep earning until next quarter, however this will hurt their long-term efforts in that small businesses that provided real-time service and parts will not be able to meet demand in real-time and, therefore, cause cost overruns for the Manufacturing sectors. Thus, lowering productivity and causing a problem with your efficiency efforts. Who will get hurt more? High tech may not be able to perform in time for its industries and its shareholders at downsized stock valuations that fall short of its earnings or share estimates. Retail outlets that need items in store in time to meet consumer demand will also be affected. The greatest long-term damage will be all of us in America due to the rise in small business bankruptcies of those operating on a shoestring.
Some of these weak small businesses should be weeded out through abnormal free market factors like this slow payout, and others that are just working to achieve ROI and pay off loans will suffer. This hurts interest rates because risk-averse banks stop lending to small businesses. It hurts the SBA guaranteed loan programs and that affects us all. It is serious and will most likely lead to the unnecessary firing of people who make up the largest percentage of American workers. Small businesses make up 2/3 of all American workers. He thinks this problem will get worse as the CFO looks for ways to hold onto cash as long as possible by limiting his accounts receivable. Small businesses must pay phone companies, electric companies, and other bills on time, while these companies are notorious for paying slowly in tough economic times. It seems to be the little guy who gets it in the shorts, such is life and it’s an acceptable fact, but it also affects us as our customer base is shrinking.
What about work and layoffs? Since small businesses cannot employ most of the masses, there will be fewer with money to spend on items sold by larger corporations.
How does this happen and how are small businesses losing? Slow payment means slow bill payment and poor credit scores. The 60 days of cash flow in the bank will also be used in the float. That float can be absorbed by some small businesses, but some small businesses will get hit and become inefficient and won’t be able to last those 60 days and neither will most of the nearly 28 million small businesses in this country that pay their bills, buy products and services and they feed. the families of their workers.
This is the most serious problem facing the US economy and it is still moving in the wrong direction since the first quarter of 2001. This is not good. Historically, Car Wash tracks new car sales markets, so our company in particular should be fine. Also, as any small business will tell you, they must constantly adapt their methods of operations to those forces, which could be a threat.