According to data from Creditsafe, some Fortune 500 companies are increasingly delaying payments to suppliers. More specifically, Creditsafe found that Fortune 500 companies have seen their days beyond terms (DBT) increase to 13.5 DBT, marking a 12% increase compared with the same period a year ago.
DBT is a metric used by commercial credit reference agencies to evaluate a company’s payment behavior. It shows how long payments are delayed beyond the agreed date. The data also showed that some companies are now paying more than 90 days beyond agreed terms.
“While it is understandable that businesses will want to try and control their cash flow in challenging times, companies, especially the larger and more profitable ones, such as those in the Fortune 500 list, should step up and look at the bigger picture,” Matthew Debbage, CEO of Creditsafe Americas and Asia, said. “By choosing to delay payments to their suppliers, they are hampering those often smaller or medium-sized enterprises from operating effectively. Many businesses are facing significant struggles at the moment, and they don’t need businesses holding back payment, making matters worse for everyone.”
Creditsafe recently developed its new COVID-19 Impact Score, gauging the likely impact the pandemic will have on individual businesses. The COVID-19 Impact Score measures the potential impact to a business using a scale from A to E, with A being the lowest impact and E being the most severely impacted.
The current pandemic is affecting many businesses to differing degrees, and Creditsafe’s analysis shows that this is not always reflected in payment behavior. Some industries, such as large grocery store chains, have even reduced their DBT, paying significantly faster than a year ago. When the Fortune 500 companies’ payment behavior is viewed alongside their COVID-19 Impact scores, there are even more startling results, according to Creditsafe.
“Our analysis suggests that more than 30% of Fortune 500 companies will face a significant impact during the COVID-19 pandemic. We see that these affected companies have already significantly slowed payments by up to 70% when compared to last year,” Debbage said. “However, what was shocking for me was to see companies deemed to face low impact, worsening their payment performance, with some of those companies paying up to 50 days beyond agreed terms. This is deplorable at the best of times, but it is now wholly unacceptable, and these companies should be doing more to help their suppliers, and in turn, the entire U.S. economy.”
