AMSTERDAM, April 14, 2016 /PRNewswire/ --
- Nearly 40% of the value of B2B invoices in Western Europe paid late
- Overdue invoices paid on average within three weeks of due date
- 1 in 4 respondents paid their suppliers late due to B2B customer's late payment
- 35% of respondents will check their customers' creditworthiness more often this year
Business conditions in 2016 are forecast to remain challenging, and the outlook for insolvencies is mixed. This is mainly due to the decline in commodity prices and the slowdown of China's economy. Little to no improvement is expected in the insolvencies environment this year, with the absolute level of bankruptcies in the eurozone forecast to remain 66% higher than the 2007 pre-crisis level.
Around 90% of the respondents of the latest edition of the Atradius Payment Practices Barometer survey for Western Europe had invoices paid late by their B2B customers over the past year. This resulted in an average of nearly 40% of the total value of B2B receivables being defaulted on. Respondents in Italy and Greece were the most adversely affected by late payments by domestic B2B customers (on average, nearly half of the total value of their B2B invoices were defaulted on, which is around 10% above the average for Western Europe). Respondents in Great Britain, in contrast, were the hardest hit by late payment from export customers (46.4% of the total value of British export credit sales were reported to have been paid late by B2B customers, compared to a 38.3% average for Western Europe).
The Atradius Payment Practices Barometer survey for Western Europe looks at the payment behaviour of the domestic and foreign B2B customers of approximately 3,000 businesses in 13 countries. The survey casts light on trends in the use of credit management tools, on the perceived challenges to profitability, on DSO and on payment practices by industry and business size. Within the still challenging insolvency environment, it is no surprise that more respondents in Western Europe in 2016 than last year (57.9%, up from 51.4% in 2015) reported that late payment of domestic invoices is most often due to customers' insufficient availability of funds. This is most often experienced by respondents in Greece. Similarly, the percentage of respondents in Western Europe reporting late payment on foreign invoices due to this reason increased to 40.2% from 37.1% last year. This was most often reported by B2B customers in Austria.
Regardless of the reason why B2B customers pay invoices late, these practices had adverse impacts on respondents in Western Europe, causing financial distress to their business and a ripple effect throughout the whole supply chain:
- nearly 25% of respondents delayed payment to their own suppliers due to late payment from their B2B customers;
- around 20% of respondents alike needed to take specific measures to correct cash flow or lost revenues;
- about 15% of respondents alike had to pursue additional financing or request a bank overdraft extension.
Therefore, respondents in Western Europe appear to be well aware of the fact that protection against payment risk arising from selling on credit is of paramount importance to protect business profitability. Around 45% of respondents reported they will not change their mix of credit management tools this year to ensure a firm grip on credit management. Over the same time frame, around 35% will check customers' creditworthiness more often, and nearly 33% will increase checks of customers' track record. In addition, 28.7% will increase trade credit risk monitoring this year.
Andreas Tesch, Chief Market Officer of Atradius N.V. stated, "Business conditions are expected to remain quite challenging across many advanced markets in 2016. Only a small improvement in insolvency levels is forecast for most markets due to rising uncertainties from abroad, namely commodity prices and the slowdown in China. In the eurozone, the absolute level of insolvencies is currently 66% higher than the pre-crisis level, and strong increases in business insolvencies is forecast in China, Brazil, Russia and South Africa. Against this backdrop, a diversified customer portfolio and a firm grip on receivables management and credit insurance can be of great value in limiting payment default risks, ensuring business growth, also during challenging economic times."
The complete report highlighting the findings of the 2016 edition of the Atradius Payment Practices Barometer for Western Europe can be found on the atradius.com website.
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.
SOURCE Atradius N.V.