Businesses across the world are struggling to meet payment terms, finds the latest Atradius Payment Practices Barometer, a twice yearly study of payment behaviour in B2B transactions, which reviewed payment management issues of 3,971 businesses in 22 countries and sovereign states across the world.
The study found that even in countries that had never slid into recession like China and Poland suffered severe impacts due largely to the challenges of working with customers in markets that were in a recession. Late payments or worse, payment defaults, were creating a range of issues for suppliers in respect to managing the financial health of their own businesses. The most frequently observed impacts were that survey respondents needed to take specific measures to correct their cash flow and that they had to postpone their own payments to their suppliers.
While more severe measures, such as defaulting on business loans or becoming non-compliant with loan covenants were experienced less frequently, the fact that 15% to 18% of respondents from businesses in Europe and 18% to 22% of the overall survey respondents have experienced these problems demonstrates the knock on or ripple effect that even a handful of customers can have on the overall global economy.
More than 50% of the respondents of the survey received payments from customers late without having been informed of the customer’s intention to do so. About 50% received requests for an extension of the payment term.
“Late payments, particularly unexpected ones, can cause a business to delay payments to its own suppliers, delay loan repayments, default on loans or in the worst case force bankruptcy," says Isidoro Unda, Chairman and CEO of the Atradius N.V. Management Board. "There are a range of credit management practices that can be used to limit this possibility. A combination of three or four practices anchored by credit insurance is potentially the best protection against the risk that many or large payment delays or defaults result in extreme financial hardship.”
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