According to a report by Janus Henderson Investors, companies worldwide took on a record $456 billion of net new debt in 2022-2023. And a report by S&P Global found that corporate debt defaults increased by 80% in 2023 and could be a problem again in 2024. As we’re now in the second quarter of 2024, we’ve already seen the toll rising debt is taking on companies. Crippling debt was a major factor in the demise of Express and BowFlex this year. In this research study, we explore how American companies are managing long-term debt and its effect on their cash flow.
U.S. businesses’ long-term debt is growing, yet paying it off is becoming more difficult.
Over half (58%) of businesses said their long-term debt has increased in the last 12 months. Meanwhile, 74% of businesses have also seen their operating expenses increase in the last 12 months. Despite these findings, only 5% of businesses said reducing debt is the most important part of growing their business.
Missed customer payments are becoming a bigger problem for American businesses.
Only 14% of businesses said most (76-100%) of their invoices are paid on time. Meanwhile, 39% of businesses said their customers paid their invoices 1-30 days past payment terms in the last 12 months. Plus, 46% of businesses said their customers paid their invoices 31-60 days past payment terms and 15% said their customers paid their invoices 61-90 days past payment terms in the last year.
With missed customer payments becoming the norm, more finance teams are prioritizing Days Sales Outstanding (DSO).
Our study found that over half (57%) of businesses reported that their DSO has increased in the last 12 months. That means more customers are paying their invoices late. There are a few reasons DSO may be increasing for so many companies. For one, the fact that 64% of businesses extend trade credit to up to 30% of their customers could have something to do with it. And given that 75% of businesses said their annual revenue has increased in the last 12 months, these two factors combined could be a key reason why DSO increased for over half of the surveyed businesses.
Complete the form below to download the report