Low commodity prices and China’s economic slowdown are hammering payment conditions in Western Europe, where 90% of businesses report they’re facing late payments from their B2B customers, according to Atradius’ Payment Practices Barometer Western Europe 2016 survey.
“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,” said Andreas Tesch, chief market officer of Atradius N.V. “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 and ensuring business growth … during challenging economic times.”
The situation has meant that nearly 40% of B2B receivables are being defaulted on, the survey of 3,000 businesses in 13 countries notes. On average, overdue invoices are being paid within three weeks of the due date.
Survey respondents in Italy and Greece had it the worst, reporting that nearly half the value of their B2B invoices are being defaulted on, which is about 10% higher than the Western Europe average.
U.K. respondents said they’d been hit hardest by late payment from export customers—46.4% of British export credit sales were reported to have been paid late by B2B customers, compared with a 38.3% average for Western Europe.
Also, late payments of domestic invoices jumped to 57.9% in 2016 from 51.4% in 2015, most commonly because of customers’ lack of funds, especially in Greece, Atradius said.
Late payment for foreign invoices also worsened in Western Europe to 40.2% this year from 37.1% last year, with respondents from Austria most commonly reporting they’d received late payment.
Atradius noted some of the reasons survey takers gave about how late payments impact them:
· About a quarter of them had to delay payment to their own suppliers.
· About 20% said they had to take measures to correct cash flow or lost revenue.
· About 15% had to find additional financing or request a banking overdraft extension.
· Nearly 33% increased their checks of customers’ track records this year.
· Almost 29% will increase trade credit risk monitoring.
- Nicholas Stern, NACM editorial associate