Unpaid Invoices: 10 worrying statistics for SMEs in 2023

October 17, 2023
6 min.

Learn how unpaid invoices impact small businesses' cash flow, business growth, and financial stability all over the US.

The financial landscape for small and medium-sized enterprises (SMEs) in the United States is becoming increasingly precarious, mainly due to the mounting issue of unpaid invoices. 

This article will delve into 10 worrying statistics about unpaid invoices that every SME owner should know. Understanding these numbers is a crucial step in safeguarding the future of your business.

Unpaid invoices and small businesses

There’s no doubt that small businesses are the backbone of the U.S. economy. They amass 29.6 million businesses and employ about half of the total U.S. workforce. 

While crucial to the U.S. economy, they are becoming increasingly vulnerable due to rising household debt, reaching $17.06 trillion in Q2 2023. This isn't just a problem for households; it directly impacts SMEs by contributing to the issue of unpaid invoices.

Credit card debt alone surged to a record $1.03 trillion, a concerning trend for businesses that often rely on credit card payments. The risk of delayed or defaulted invoice payments to companies rises significantly when consumers are burdened with such debts.

Other consumer loans, like retail credit cards and auto loans, also increased, adding to the financial pressures on households and, by extension, SMEs. When families juggle multiple debts, settling business invoices often takes a backseat, exacerbating cash flow issues for SMEs.

Unpaid invoices are symptomatic of this more significant issue and warrant immediate attention from business owners.

10 worrying unpaid invoice statistics for SMEs in 2023

The financial health of Small and Medium-sized Enterprises (SMEs) is often a reliable indicator of the economy's overall well-being. However, the unpaid invoice crisis facing SMEs in 2023 is a cause for concern. Here are 10 alarming statistics that underscore the gravity of the situation:

Unpaid invoice statistics

  1. Small businesses are grappling with a colossal $825 billion in unpaid invoices.
  2. This unpaid invoice amount equates to 5% of the entire U.S. GDP.
  3. On average, businesses in the U.S. have to wait 21 days to receive payments, affecting their operational efficiency.
  4. Small businesses have an average of just 27 days of cash reserves. This leaves little wiggle room for survival.
  5. The typical small business has around $84,000 in unpaid invoices, which can hamper growth.
  6. A worrying 81% of these unpaid invoices are already past their due date, increasing the risk of never being paid.

Unpaid invoices top industries

  1. Information Industry: Businesses in the information industry are waiting on an average of $163,551 in unpaid invoices, the highest among various sectors.
  2. Wholesale Trade Industry: The average business in the Wholesale Trade industry has $139,554 in unpaid invoices, adding to their financial strain.
  3. Construction Industry: Businesses in the construction industry are waiting on an average of $110,348 in unpaid invoices, affecting their ability to take on new projects.
  4. Transport and Warehousing Industry: The average business in the Transporting and Warehousing industry is waiting on $102,074 in unpaid invoices, impacting their logistics and operations.

These statistics paint a concerning picture for SMEs in 2023, emphasizing the urgent need for effective invoice management and debt recovery strategies.

How to collect unpaid invoices consistently

Conveyor belt to convert unpaid invoices into paid invoices.

Collecting unpaid invoices is a challenge many businesses face, but the year 2023 brings innovative, digital-first tactics to make this task more manageable and efficient. Below are the 4 most crucial measures you can take to ensure consistent collection of unpaid invoices.

1. Prevention is the best cure

Being transparent from the get-go about your payment terms, schedules, and any potential late fees can set the stage for smoother transactions. This transparency should be documented and agreed upon by both parties to serve as a reference point in case of disputes. 

Additionally, knowing your customer is crucial. Before extending any form of credit, a thorough background check on the customer's financial history can provide valuable insights into their reliability.

2. Proactivity and consistency win the race

Once a transaction is complete, prompt invoicing and consistent communication are key. Sending invoices immediately after services have been rendered and maintaining regular contact can serve as gentle reminders for customers to fulfill their payment obligations. Making it easy for customers to pay by offering multiple payment options also goes a long way in securing timely payments.

3. Find your customers where they are

In today's digital age, leveraging omnichannel communication can be a game-changer. This involves integrating various methods of communication, such as email, SMS, and self-service portals, to provide a seamless and consistent experience for the debtor. Timing is also crucial; using predictive analytics to determine the optimal time to send out reminders or follow-ups can significantly increase the payment likelihood.

4. Generic doesn’t cut anymore

Personalization is another critical aspect of effective debt collection. Understanding your debtor's behavior, preferences, and communication channels can help tailor your collection efforts. Automation tools can be handy here, allowing you to send personalized messages at times most likely to elicit a response.

To learn more about this topic, check out How to collect overdue payments in 2023: Turn overdue into paid.

Wrapping Up

The unpaid invoice crisis is a pressing issue that threatens the financial stability of SMEs in the United States. The statistics are alarming, and the need for effective debt recovery strategies has never been more urgent.

If you want to fight the unpaid invoices war with the most cutting-edge arsenal out there, try Arrears today.