The recession is not an equal-opportunity malady. Small companies have suffered – and, importantly, continue to suffer – more intensely than larger companies.

While that news may not surprise, this nugget ought to: The suffering, which takes the form or late accounts receivable (A/R) payments and higher days beyond (payment) terms (DBT), poses a risk to small and large enterprises alike.

Larger companies are making smaller suppliers suffer by taking longer and longer to pay them. Smaller companies are paying larger, big-name suppliers quicker while delaying payments to other small companies.

“Many small businesses live under a tight cash conversion cycle so if they are pushing cash out the door quickly for one class of suppliers (big companies) but not being paid quickly enough by their own customers, (other small businesses) then they can’t pay their own bills and DBT increases,” notes Cortera Vice President Alex Coté.

Cortera’s Supply Chain Index, a measure of financial confidence, is based on the payment activities of approximately 350,000 businesses, including manufacturers, distributors, wholesalers, retailers, services, and transportation industries. The index helps companies to get a better understanding of overall sales confidence throughout the supply chain.

Cortera’s Small Business Index – here’s the latest report – also measures average DBT (in addition to tracking A/R) among 260,000 small businesses (those with fewer than 500 employees).

This index was created so that the firm could find out how the recession has been affecting small businesses, and their cash flow specifically. “You can see how this starts to spiral if small businesses can’t tap other sources of lending — from banks or even personal finance against their own assets – to manage these cash crunches.

This hardship can ultimately affect the flow of products and services from smaller companies to larger enterprises, which poses supply chain risks for larger companies.

What can be done? This APQC article offers several suggestions for better cash flow management. ###