Insolvency Outlook Deteriorates in NAFTA and Brazil, Atradius Survey Shows
BALTIMORE, September 28, 2016 /PRNewswire/ --
- Rising insolvencies in the US (+3%) and Canada (+4) this year
- GDP contraction in Brazil (-3.4%) leads to rising bankruptcies
- 92% of businesses surveyed experienced late payment from their B2B customers
- 2 in 5 businesses surveyed delayed payments to suppliers due to customers' late payment
The 2016 insolvency outlook for NAFTA and Brazil has deteriorated with increases of 3% and 4% forecast for the US and Canada respectively. This increase is driven by low commodity prices. Low oil prices, slowdown in economic growth in the US and slow productivity growth in Mexico, and the recession in Brazil, are the primary reasons for the forecasts of rising bankruptcies in these countries. This challenging insolvency environment affects the way businesses protect themselves against payment risk by B2B customers.
According to the latest edition of the Atradius Payment Practices Barometer survey for the Americas (NAFTA and Brazil), 92% of the businesses surveyed, experienced late payment from B2B customers over the past year. This translated into an average of nearly half of the total value of B2B invoices' being paid late. Due to late payment by customers, 2 in 5 businesses had to delay payments to their own suppliers causing a knock-on effect throughout the entire supply chain. Essentially, a businesses' cash flow slows, restricting their ability to invest and grow.
The September 2016 edition of the Atradius Payment Practices Barometer survey sheds light on the payment behavior of domestic and foreign B2B customers in the countries surveyed. It looks at local trends in the use of credit management tools, at the perceived challenges to profitability, at DSO, and at payment practices by industry and business size.
Due to the financial distress caused by late payment by B2B customers:
- around 30% of businesses had to take specific measures to correct cash flow
- around 20% of businesses defaulted on payments to suppliers, and had to pursue additional financing or lost revenues
To protect profitability of their business, 40% of the businesses surveyed will request secured forms of payment from their B2B customers and check both the creditworthiness and payment history of their customers more often over the next 12 months.
Andreas Tesch, Chief Market Officer of Atradius N.V. comments, "The outlook for insolvencies in the majority of the advanced markets, including the US and Canada, has deteriorated. Regardless of the underlying reasons for this, the challenges posed by a difficult insolvency environment require that businesses resort to sound trade receivables management strategies enabling them to grow safely."
David Huey, Regional Director of NAFTA adds, "The upward pressure on insolvencies that the US and Canada are currently experiencing makes their business environment more challenging, emphasizing the importance of due diligence and protection against payment defaults."
The complete report highlighting the findings of the September 2016 edition of the Atradius Payment Practices Barometer for the Americas (NAFTA and Brazil) can be found on the atradius.us website.
About Atradius
Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in 50 countries. Atradius has access to credit information on 200 million companies worldwide. Its credit insurance, bonding and collections products help protect companies throughout the world from payment risks associated with selling products and services on trade credit. Atradius forms part of Grupo Catalana Occidente (GCO.MC), one of the leading insurers in Spain and worldwide in credit insurance.
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