Small businesses face accounting problems and overdue invoices during pandemic

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Small business owners had to contend with unpaid bills and inadequate accounting during the pandemic and had to cover their expenses by selling heirlooms and other valuables.

A survey released Tuesday by Wave, an H&R Block company, found that 17% of 1,008 micro-business owners with nine or fewer employees surveyed said invoices they sent were never paid. Almost one in 10 (8%) said they waited more than a year for bill payments, while 70% waited between one and six months. Almost one in 10 small business owners (8%) said they sold a family heirloom to cover expenses due to late payments from clients, while 11% had to take another job. Additionally, 30% of respondents said they needed to borrow from their own money, and almost one in five (19%) needed to borrow from family or friends. The same percentage of respondents had to give up or reduce their own salary, while 13% were forced to take out a loan.

The pandemic has forced millions of small businesses to close their doors over the past year and a half. Those who managed to survive had to take extraordinary measures to keep their doors open.

Closed stores on Grant Avenue in San Francisco

David Paul Morris / Bloomberg

“Cash flow has become a major issue for small business owners, especially with late payments from customers,” said David Axler, vice president of books, banking and tax at Wave. “We found that about 70% of all respondents waited between one and six months to get paid because of overdue bills. These are invoices that are paid beyond the standard deadlines set by an invoice, whether it is 15 days or 30 days. The majority of small business owners we have heard of wait anywhere from one to six months to get paid. This results in challenges for this company, and 25% said they had waited more than a year or had not yet been paid for the services rendered. “

When it comes to excuses for late payments, small business owners reported hearing a variety of reasons, ranging from “I didn’t have the money” (34%) to “I just forgot” (33 %), “I never received the invoice” (24%) and “I was on vacation” (13%).

“Securing cash flow following a delay or default was a major problem,” Axler said. “We also went a little further and asked, ‘Why aren’t they paying? »What do you mean by your customers to explain why? The most common is “we didn’t realize” or “we just forgot” or “I never had”. So, this bill concept not actually being there, it was about 25% of those who experienced late payments. The excuse was that the clients had not received the information or had completely forgotten about it, so this lack of follow-up or awareness that there is even a payment to be made. And we’ve heard it from service companies in particular. This is less common in the retail business where the purchase must be made at the time the service is rendered or if it is a product. But when you provide a service, whether you are a consultant or a creative photographer, maybe a personal trainer of some kind, the possibility of late payment is high because often the invoice is sent after the service is rendered, so there is a high possibility of late payment. creates a strong possibility of this happening.

The survey found that most of those surveyed used traditional payment methods such as paper checks (71%) and cash (61%), while half accepted debit or credit cards (50%) . Almost two in five (38%) said they used their personal checking account for business expenses, while 29% said they did not separate their personal and work finances at all. More than one in five (22%) said they use pen and paper to track their finances, while 14% said they use an Excel spreadsheet. Some 14% of respondents admit they don’t follow up with customers on unpaid invoices, while 13% admit they forget to send or are late in sending invoices in the first place. More than one in five (21%) said they do not record or track their receipts, while more than one in ten (11%) use high interest financing to finance their business.

Cash flow remains a big challenge for small businesses during the pandemic. Almost half (45%) of small business owners surveyed cite cash flow as a challenge. Microenterprise owners surveyed said other barriers to cash flow, including high bank account fees (53%) and slow access to funds in their bank account (31%), were the main reasons why they would consider changing their current banking provider.

Looking ahead, the microenterprise owners surveyed felt more confident and motivated as a result of the vaccine rollout and the continued economic recovery. Almost two in five (39%) said they feel even more motivated to continue working for themselves, and 35% said they are confident about the financial future of their small business.

Many digital business practices that started during the pandemic are expected to continue. More than one in five (21%) of small business owners surveyed have started accepting digital payment systems like Venmo and PayPal during the pandemic and plan to continue to do so, while 15% have started or plan to continue. digital banking and verification. Almost one in 10 (8%) have started or plan to continue using digital invoices or accounting, while 14% have started or plan to continue doing virtual consultations, quotes or presentations, and 13% have started or plan to continue offering virtual services or online sales.

“One positive trend we’ve heard and observed is convenience with digital payments,” Axler said. “The acceptance of digital payments and the ease with which payment can be made has increased. So even though the most common response we’ve heard was that they still rely on 70% paper checks and 61% cash, just over half are now comfortable accepting. digitally debit and credit cards. Businesses that accept digital payments like debit and credit are actually more likely to get paid and get paid faster than those that rely on traditional methods. During the pandemic, this was more pronounced because physical control required some sort of semblance of physical proximity. I had to hand you something, or I had to be there to get it back, but now that I can trust it digitally, I can take what was so dangerous in some cases, and now it is a safe, reliable and traceable to Getting Paid. “


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