Small Biz Watch: Squeeze is on in paying suppliers
Many small-business owners might be noticing that their large customers seem to be cutting checks a bit more slowly than in the past.
It's not their imagination. According to a recently released study of the top 1,000 U.S. companies by REL Consultancy Group, large corporate customers are lagging on payments to their vendors. The portion of industry sectors paying suppliers more slowly than in 2004 jumped from 45 percent to 65 percent. The share of individual companies more sluggish in their payments than last year jumped from 46 percent to 56 percent.
Why is this happening? According to REL, large companies are trying to improve their working capital and cash position by squeezing suppliers. And while this might provide a temporary improvement in a company's cash position, it actually can be damaging in the long run since small businesses will ultimately raise their prices to cover the costs of waiting to get paid.
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