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Universal Recession Risk: Small-Company DBT (Business Finance)
October 14th, 2009
Eric Krell, Business Finance Magazine / Big Fat Finance Blog
The recession is not an equal-opportunity malady. Small companies have suffered – and, important, continue to suffer – more intensely than larger companies.
While that news may not surprise, this nugget ought to: the suffering, which takes the form or late accounts receivable (A/R) payments and higher days beyond (payment) terms (DBT), poses a risk to small and large enterprises alike.
Larger companies are making smaller suppliers suffer by taking longer and longer to pay them. Smaller companies are paying larger, big name suppliers quicker while delaying payments to other small companies.
“Many small businesses live under a tight cash conversion cycle so if they are pushing cash out the door quickly for one class of suppliers (big companies), but not being paid quickly enough by their own customers (other small businesses) then they can’t pay their own bills and DBT increases,” notes Cortera Vice President Alex Coté.
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