Last week we reported on a large uptick in business from major retailers, however, when analyzing data week by week it doesn’t really allow you to account for outliers. It is clear that the positive news we reported last week was indeed an outlier and not a sign that the economy was starting to recover. Unfortunately, our data from last week was the most dismal yet. Keep in mind, that while many states discussed reopening last week, it wasn’t until Friday that Georgia became the first state in the nation to begin the process. It will be interesting to see whether or not these reopenings make any impact in the coming weeks.
The number of purchase orders we received credit approval requests for last week was at 28% of normal levels, which is pretty consistent with the data from the last few weeks. It is the second lowest percentage we’ve seen since the start of the COVID-19 pandemic, only the data we reported on two weeks ago was lower at 25% of normal. The bigger problem however is that total amount of dollars being requested for credit approval has dropped to 33% of normal, the previous low was 39%. Given how good last week was, it is not entirely surprising that this week is so low, after all, it was unlikely that we would be seeing large purchase orders two weeks in a row.
Along with the record low dollar amounts for purchase orders, the same was true for invoices purchased last week. The number of invoices purchased last week were down to 34% of normal levels, where the previous low had been 40%. Again, this came on the heels of a very good week the previous week. Certainly the economy is in the dumps, but neither purchase orders or invoices really indicate that things are getting worse, but rather just that they aren’t getting any better.
While it was no doubt a bad week for purchase orders and invoices purchased, it was actually a much worse week for payables. For the first time since April 1st, when we started analyzing the effects of the COVID-19 pandemic, our dollar amount of open receivables has actually gone up, a 2.2% increase over last week. They had been declining by an average of 5.5% per week prior to now. Even more concerning is that this happened during a week when we experienced our lowest level of purchased invoices yet. Today approximately 32% of receivables are still current, accounting for just less than 60% of dollars. While that total number of current receivables is the lowest yet, the dollar amount seems to be remaining fairly consistent. This would imply that it is larger orders from major retailers that have made up the bulk of recent business, and that we are doing very little with small businesses.
We have also reached the point where many businesses have now been closed for over a month, so it isn’t a surprise that there are very few current open receivables. The percent that are now 1-30 days beyond terms have remained level from last week, although the number of them has declined by 13%. However, there was a major uptick in open receivables that are now 31-60 days beyond terms. The number of receivables in this aging bucket has jumped by nearly 50%, while the dollar value of these receivables has jumped by 35%. This shows us that invoices for small businesses that became due just prior to or shortly after lockdowns got implemented that hadn’t gotten paid when they became due, are still not getting paid now.
Clearly this is further proof that the funds set aside for small businesses as part of the CARES act are either insufficient or unavailable to many small businesses. It will be interesting to see what happens in the next few weeks with invoices that are becoming 31-60 days beyond terms. If the number continues to grow, it will be due to invoices that were created prior to the lockdowns, but didn’t become due until after small businesses were forced to shut their doors. Keep following the Factoring 101 Blog for future updates on how COVID-19 is affecting small business in America.