Chart of the Week: Smaller Businesses Tend to Pay Late

Data reported in the Business Benchmark Report by credit bureau Experian shows that smaller businesses were more likely than their larger counterparts to be severely delinquent in paying their bills in fourth quarter of 2010 .

While non-employer firms have a relatively small share of payment dollars that are 90 or more days late – 5.6% – the share of severely delinquent payment dollars declines with firm size for businesses with employees. As the figure below indicates, the proportion shrinks from 9.8% for businesses with 1 to 4 employees to 1.8% for businesses with 1000 or more workers. The sharpest decline is between businesses with 1-4 employees and those with 100-249 employees. While the share of payment dollars that are severely delinquent continues to decline for businesses with at least 250 employees, the rate of decline is very slight above that firm size.

Source: Created from data from the Experian Business Benchmark Report, Q4, 2010

Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

2 Reactions
  1. I believe that the general trend holds true.

    However, I would question the degree of the swing from smallest to largest businesses.

    Here’s why: many of the smallest businesses do not report to credit agencies. So they are less likely to report how many times THEY have had to wait 90 days or more to get paid from large corporations. Trust me, the smallest businesses are at the bottom of the totem pole when it comes to getting paid, if large corporations start running into trouble.

    On the other hand, large corporations probably don’t hesitate to report on the credit of small businesses.

    So I wonder if the disparity in WHO reports to credit agencies makes a difference? Something to think about.

  2. Scott, is it a chicken or egg scenario?

    Everyone who has had to make a payroll knows who is weak and who is strong. Analogous to this point is a function of convince….who can I pick-on?

    Balance sheet capitalization is what it is. Preying on the weak is quite basic and not just a function of “Average Payment Period”

    Who gives a Sh#t about small scale – slow pays?

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