Just as consumers rely on their FICO score to prove their credit worthiness, the PAYDEX index from Dun & Bradstreet Credibility Corp. evaluates businesses' payment habits. In the first half of this year, the national PAYDEX index is down as much as 3 percent compared to the second half of 2015, The Associated Press reported, indicating that companies are failing to make payment on time. As a result, SMBs around the country are struggling with their cash flow.
For example, the owner of one public relations firm in California says her payroll, rent and other expenses have been tougher to make due to slow payment schedules from longtime clients.
"I've had clients who used to pay on time like clockwork all of a sudden being more than 30 or 45 days late," the business owner told AP reporters.
To help encourage companies to make their payments on time and solve her cash flow woes, the PR firm now accepts credit card and electronic payments.
"Speeding up payments can have a significant impact on the economy."
The broader impact of fast payments
New research from MIT and Harvard shows that speeding up payments can have a significant impact on the economy as a whole. By shrinking B2B payment time to just 15 days, the report found that companies experienced nearly a 10 percent increase in payroll - freeing up room in the budget to hire new workers and increase wages.
"This is the first time an acceleration in cash collection has been shown to have an effect on hiring in the all-important sector of small businesses," Jean-Noel Barrot, assistant professor of finance at MIT's Sloan School of Management, said in a press release. "This suggests that increasing the speed of payment to small businesses can effectively stimulate job creation."
At Vantage, we specialize in helping B2B companies accept electronic payments at the lowest possible rates. To get started, speak with one of our payment advisors today!