Overdue business-to-business (B2B) invoices in Eastern Europe are on the decline, while sales on credit terms rose slightly. Despite this, nearly 60% of companies prefer not to use credit on B2B sales. Payment default risk is also expected to worsen in the region, according to a survey from Atradius.
Overdue B2B invoices increased roughly 5% in 2016, but a more than 1% drop this year brought it to 41.5%. Nearly nine out of 10 responses reported late payments from domestic B2B customers. Foreign customers’ late payments decreased slightly but still impacted about eight in 10 responses. The Czech Republic was most likely to experience late payments while Hungary was the least likely. Turkey was the most affected and saw days sales outstanding (DSO) numbers at an average of 73 days. The regional average DSO was 61 days.
As far as sales on credit terms, the average percent of B2B sales to domestic customers is higher than that of foreign customers. This has been seen before in previous surveys. Poland had the lowest average percent of credit sales at just below 30%. Hungary had the most sales on credit terms with about two out of every three transactions. Roughly 40% of Eastern European companies sold on credit terms, which was just ahead of Western Europe.
Payment terms also increased from 2016 to 2017 in Eastern Europe. Of the countries surveyed, respondents averaged 35 days this year compared to 31 last year. Turkey had the largest increase to 47 days, and it had the longest invoice-to-cash turnaround at 42 days.
Liquidity and insufficient funds were the issues most often cited for payment delays. Complexity of payment procedures was also a reason for B2B payment concerns. “According to responses across the countries surveyed, 45% of the average total value of domestic B2B invoices remained unpaid after the due date,” said Atradius analysts.
“Against this backdrop, a strong focus on the management of trade credit risk is essential to maintaining the financial viability of a business,” said Andreas Tesch, Atradius chief market officer, in a news release. The Atradius Payment Practices Barometer survey included more than 1,000 companies from the Czech Republic, Hungary, Poland, Slovakia and Turkey.
– Michael Miller, editorial associate