According to a study by U.S. Bank, 82 percent of small businesses fail due to poor cash flow management. I know many small businesses where lack of cash on-hand forced them to shut down right as they were hitting there stride. My mother’s staffing business eventually shut down because of this exact problem.
This is not an uncommon story for small business owners but I didn’t realize was the scale to which this is happening until my team at Fundbox analyzed more than 39 million invoices on our platform from the tens of thousands of small business customers we serve.
We estimated the total amount in unpaid invoices across all U.S. small businesses is approximately $825 billion, equivalent to about 5 percent of the U.S. GDP. On average, each small business has $84,000 in unpaid invoices.
Can you imagine what they could do with an extra $84,000 to fund their operations? Likewise, can you imagine how the economy could benefit from millions of small businesses spending $84,000 each on supplies, equipment, advertising or hiring more employees?
The below infographic highlights how this phenomenon happens when small businesses’ invoices go unpaid, and the tremendous impact it has on the economy. The takeaway for me is simple: when small businesses don’t get paid on time, the entire economy slows down.