A new research report from leading trade credit insurer Atradius examines the payment behaviours of B2B trade creditors and the payment experiences of more than 3,000 businesses based in Western Europe.
The report reveals:
- Late payment affects 90% of businesses in Western Europe
- Nearly 40% of the value of B2B invoices in Western Europe paid late
- 45% of the value of B2B invoices in Great Britain remain unpaid past due date
- 39% of GB businesses surveyed intend to check their customers’ creditworthiness more often
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 Great Britain 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). In contrast, 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).
In examining 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. However, respondents in Great Britain also cited inefficiencies in the banking systems as a factor affecting late payment from foreign customers.
1 in 4 respondents paid their suppliers late due to customers’ late payment
Late payment of trade receivables had adverse impacts on respondents in Western Europe, causing financial distress on their business and a ripple effect throughout the whole supply chain.
- Within Western Europe nearly 25% (24% in Great Britain) of respondents delayed payment to their own suppliers due to late payment from their B2B customers
- As a consequence of late payment, over 25% of GB respondents (18% Western Europe) needed to take specific measures to correct cash flow or lost revenues
Respondents to the survey appear to recognise that protection against payment risk arising from selling on credit is of paramount importance to protect business profitability; with around 45% reporting that they will not change their mix of credit management tools this year. Over the same time frame, around 35% will check customers’ creditworthiness more often (39% in Great Britain), 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 at www.atradius.co.uk
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