June 3, 2020
Categories:
A Slowdown in the Recovery Prior to the Civil Unrest
After four straight weeks of economic improvement, this past week saw a slight setback. While all numbers were down over this past week, they weren’t down by a lot and are still much improved over what we saw at the end of March and throughout all of April.
Purchase Orders
This past week saw the fewest number of credit approval requests that we have seen since the end of April. However, while they may be down 18% from last week, they are still up over 50% from the last week of April, and up 72% from their low point which occurred the first week of April. In terms of total dollars being requested, they are the lowest they’ve been in 2 weeks. We saw a 25% drop from last week, but that is still a 69% improvement over the low that occurred in the third week of April. While we hate to see a step backwards, the previous four weeks have shown tremendous growth and we are still much improved over the lows that came at the height of the COVID-19 shutdown. So far the data for this week is looking incredibly positive, but it is quite possible that many of these credit approval requests were for orders placed before the weekend’s violence. We will have to wait probably another two weeks to see how the economy is affected by the rioting that has occurred.
Purchases
As we have stated, purchases have been fluctuating wildly in both directions each week. Last week we saw positive growth for consecutive weeks for the very first time, but unfortunately that growth has not been sustained this week. Purchases this week dipped down to 44% of normal levels after having been a little over 60% the previous week. However, this is still a drastic improvement over what we saw in the final week of March, all of April, and even the first week of May.
Payables
For the first time since we started tracking outstanding receivables on April 1st, we actually experienced an increase for the very first time in total dollars outstanding, even if it only was a 1% increase. However, the number of open receivables and accounts with balances both continued to drop. The number of accounts with open receivables dropped 2.5% this week and are now exactly half of the number of open accounts we had on April 1st. While this is certainly positive sign that many businesses have been able to pay their debts from before the COVID-19 pandemic, it is upsetting that very few of them have been able to place new orders.
As for percent of receivables that are current, we saw an increase of 3% from last week to 58% of all invoices, continuing a trend of growth that has been going on for the past 4 weeks. However, in terms of total dollars we actually saw a decrease of half of one percent this week, marking the first time we have seen a decrease since the end of April, and putting total dollars that are current at just below 70%. This is rather surprising given that total dollars outstanding actually grew over the last week since any growth would have to be attributed to new receivables being purchased. However, it appears that much of the growth over the last week or two may be attributable to small businesses that are reopening, and the major retailers have slowed down their ordering as consumers have stopped hording many products. Their large orders from earlier in the pandemic are aging and are no longer current.
There was no change from last week in the number of receivables that are 1-30 days beyond terms, marking the first time these numbers haven’t declined since the first week of April. However, while the number of receivables remained steady, the total dollars increased by 25%. This is rather shocking given that last week they decreased by 40% and this is the first time since the second week of April that we have seen an increase. Receivables 1-30 days old account for 14.5% of all outstanding dollars, which is actually normal. This of course is great news as it means that payables for retailers are returning to normal.
Despite these increases in receivables 1-30 days beyond terms, we are still seeing decreases across the board in receivables that are more than 30 days beyond terms. We have 16% fewer receivables that are more than 30 days late, and they account for 10% less total dollars than they had the week before. The vast majority of this improvement was seen in invoices that are 31-60 days late, which are mainly for orders placed before stay-at-home orders were issued, but became due after they were issued. However, we did also see slight improvements in invoices that are 61-90 days or more than 90 days late, all of which were already past due prior to the first stay-at-home orders being issued. Invoices that are more than 30 days late still account for 23% of all invoices and 16% of total dollars outstanding, under normal conditions these numbers would be 7% and 6% respectively. However, this is the third straight week of positive improvement in the category, so we are optimistic that these very past due invoices will start getting paid down as well.
State-by-State
Once again, we will be comparing states that reopened early, prior to May 9th, to those that reopened afterwards. As has been discussed before, the states that reopened early are the states whose economies were the hardest hit, and once again it seems like these states are still struggling to recover as quickly as states that have proceeded with more caution.
The states that reopened early have now accounted for 17% of our total volume in the weeks since reopening, which is a large improvement over 14%, 11%, and 7% in the three weeks prior. However, this is still a far cry from the 40% of volume that they normally account for and even the 23% that they accounted for during the weeks that stay-at-home orders were kept in place. This isn’t all bad news however, the volume we are doing with businesses in these states does appear to be steadily increasing each week, it just isn’t increasing at the same rate as businesses in states that waited longer to reopen. In fact, business has indeed improved each and every week since Georgia became the first state to reopen in states that reopened early. In the states that waited longer, we are seeing lots of fluctuations in their business volume, but they experienced a drastic increase as soon as Georgia reopened and have remained way above the levels that they were at prior to that.
As for payables, businesses in states that reopened early did indeed have an easier time paying their bills after they were allowed to reopen and were 6% less likely to be past due a few weeks ago. However, now that most every business has been allowed to reopen at some capacity, the businesses in states that reopened early are only 2% less likely to be past due. However, because businesses in these states have seen much larger declines in volume since the pandemic, they have much fewer current invoices, and the vast majority of what is outstanding is indeed beyond terms, meanwhile the vast majority of what is outstanding in states that waited longer to reopen is now current.
Business is certainly improving from its low points at the height of the COVID-19 pandemic back in April. More and more states are easing restrictions, and many school districts are discussing plans for reopening in the fall. However, last weekend and the beginning of this week have been plagued by civil unrest that has unfortunately damaged many businesses that were just starting to reopen. Only time will tell what impact this has on the economy, and even worse, if it will also set us back in our fight against COVID-19. DSA Factors as always will continue to monitor our data and keep you informed on the state of small business in America.
