Asia-Pacific Businesses’ Financial Stability Challenged by Cash Flow in 2013

Maintaining sufficient cash flow is considered the biggest challenge that businesses in Asia-Pacific have had to face this year.

 

According to the Atradius Payment Practices Barometer survey, respondents’ B2B customers, particularly foreign customers, took almost twice the extended payment term to pay for their credit purchases.

 

The November 2013 Atradius Payment Practices Barometer, a report based on feedback from 1,670 B2B suppliers of products and services in the Asia-Pacific region (Australia, China, Hong Kong, India, Indonesia, Japan, Singapore and Taiwan) highlights that 33.6% of the respondents in the region considered maintaining sufficient cash flow levels to be the biggest challenge they have had to face this year. This was most notable in Singapore were 36.8% of the respondents shared this opinion.

 

As in other regions across the world, payment defaults have been more of an issue in 2013. In the Asia-Pacific region, approximately 30% of the total value of B2B invoices was unpaid at the due date (in Singapore about 35% was overdue). This was a bigger problem with foreign invoices than domestic invoices. More than 5% was uncollectable (in India about 7% was uncollectable).

 

As a result of the late and unpaid invoices, there is a 26 day difference in the average Days Sales Outstanding (56 days) and the average credit period extended to B2B customers (30 days) recorded in the Asia-Pacific region. India recorded the highest DSO (80 days) of the countries surveyed in Asia-Pacific.

 

In the 2013 survey, ‘liquidity constraints’ was considered the primary reason for payment delays from domestic B2B customers by 50.1% of the respondents. This compared to 53.5% in 2012. Respondents in Indonesia (63.5%) experienced the most problems with late payment from domestic customers. Complexity of the payment procedure is the most cited reason for payment delays by foreign B2B customers (47.8% of respondents). Chinese respondents were the most impacted in this respect (61.2%).

 

“Despite being somewhat insulated from the economic difficulties of Western Europe, Asia-Pacific businesses aren’t completely immune," says Eric den Boogert, Director of Atradius Asia. "Payment default, particularly from foreign buyers has presented as much of an issue in the region as it has in other regions across the globe. With China slowing its growth, insolvency growth on the rise in Australia, structural reforms necessary in Indonesia, and political issues creating greater uncertainty in India, payment behaviour has weakened.”

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