Richard Reynolds, Head of Commercial – Birmingham, at Atradius, reveals the latest figures on late payments, from the company’s Payment Practices Barometer report.
One of the regular reports we produce, researches and analyses payment behaviours across key trading regions. Our most recent survey focuses on Western Europe and reveals that of the businesses surveyed, 9 out of 10 had experienced delays on both their foreign and domestic business-to-business invoices over the past year. This is a troubling statistic, with payment delays inevitably leading to uncertainty – and more troubling still is that these figures are up on those reported last year.
As a result of buyers taking longer to pay, an increased 41% of the total value of sales across Western Europe are being affected, leaving many businesses challenged to make changes to protect their cash flow. We found that domestic buyers are now taking 59 days to pay invoices, five more days than three years ago and six days greater than foreign buyers. However, credit terms continue to be offered to 43% of domestic buyers, confirming that trust in domestic trade continues within the region.
Among the reasons cited by businesses in Western Europe, availability of funds is by far the main cause of payment delay. Complex payment procedures are also highlighted as contributing to the late payment pattern. In fact, almost a quarter of our survey respondents emphasised the prevalence of procedural complexity with foreign buyers, resulting in credit terms being made available to only 35% of all foreign invoices by Western European exporters.
In contrast, 58% of their Eastern European counterparts attributed late payment to customers’ liquidity issues, with 45% of the average total value of domestic business-to-business invoices remaining unpaid after the due date.“In the face of mounting cash flow pressure some businesses may be tempted to see reducing credit sales as an option for regaining control of their finances, but there are other options to consider, not least Credit Insurance. Insured businesses are able to reap the benefits of financial security and gain advantage by accessing critical business intelligence about their customer portfolio, potentially opening profitable new opportunities.
One of the most telling outcomes of this study is that for many companies, domestic sales generate a substantial share of their uncollectable receivables. Therefore, it’s just as important to protect your business from domestic defaults as it is from foreign payment defaults. At Atradius we are helping businesses manage their credit risks in smarter, more effective ways. As a result, we are seeing increased use of our services resulting in improved performance when selling on credit.
The complete reports highlighting the findings of the Atradius Payment Practices Barometer for Western Europe (April 2017) and the Atradius Payment Practices Barometer for Eastern Europe (May 2017) can be found in the Reports section of www.atradius.co.uk.
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.