Accounts Payable can make or break a company’s cash flow. If a company’s cash is running low, then the company will likely struggle to pay its bills on time. And this will show up in their business credit report in a few different ways.
First, you might see that the percentage of outstanding bills that have been paid on time have dropped drastically in recent months or over a period of time. Second, you might also a growing number of late payments, particularly those that are delinquent (91+ days).
As we discussed in our Financial & Bankruptcy Outlook: Retail report, Stein Mart has been struggling for some time with paying bills on time. If you look at their payment behaviors, things don’t look all that great for the company. Between November 2022 and February 2023, Stein Mart’s DBT hovered between 95 and 99 (which are very high, as it is). But then its DBT rose to 105 in March of this year and has stayed there since. This is not a good sign and indicates the company is likely running out of cash and may have considerable debt piling up. Unfortunately, there haven’t been any financial earnings reports released since Stein Mart filed for bankruptcy in 2020. This makes it difficult to fully ascertain their financials and how much debt they have accrued in the last three years.
At the end of 2020, Retail Ecommerce Ventures bought the struggling retailer during a bankruptcy court auction for $6.02 million. Since then, Retail Ecommerce Ventures has fallen on hard times itself. A source told the New York Post that REV’s debt totaled approximately $200 million, with revenue and losses of about $60 million in 2022, compared to about $150 million in sales and about $90 million in losses in 2021. At the same time, it’s been reported that REV executives have opened the financial books of their privately held company to prospective investors for a potential sale of all their assets, a bankruptcy filing or a last-minute financial deal that could save them.
When we looked at the payment behaviors of Neiman Marcus, we could see that the luxury retailer also struggled recently with paying its bills on time. Over the last six months (May through October 2023), its track record of paying bills on time has been erratic. For instance, 82.55% of its bills were paid on time in September 2023. But then the following month, that dropped drastically to just 57.05%. Meanwhile, the number of late payments (1-30 days) increased drastically in the last two months – rising from 14.13% in September to 39.22% in October.
But it’s not all bad news for the retailer. Our data indicates that most of its late payments are only 1-30 days late and very few are delinquent. More specifically, Neiman Marcus has improved on paying its bills, with late payments (61-90 days) and delinquent payments (91+ days) dropping considerably in the last two months. While 4.41% of its bills were delinquent (91+ days) in August, this dropped to 2.14% in September and 2.77% in October. At the same time, the value of outstanding bills dropped drastically in October too. For example, the value of late payments (1-30 days) dropped by 55.75% and the value of late payments (31-60 days) dropped by 79.64%, compared to the previous month. Meanwhile, the value of late payments (61-90 days) fell by 97.02% and the value of delinquent payments (91+ days) fell by 79.36% in October.
But just because a company hasn’t filed for bankruptcy doesn’t mean it always pays bills on time. In 2023, Target’s figures fluctuated between positive and negative results across the board. And in terms of paying bills, our data shows the number of on-time payments dropped from 87.7% in August 2023 to 77.94% in September.