Cash Flow Protection Tops Agenda of APAC Businesses

Around 40% of the suppliers surveyed in the Asia Pacific region anticipate increasing the use of credit management tools to protect cash flow from B2B customers’ late payment over the next year.

Nearly half of the suppliers surveyed in the region plan on checking their customers’ creditworthiness and payment history significantly more often over the same time frame. This reflects concern about the protection of corporate profitability, to ensure the viability and safe growth of the business.

Asia Pacific is forecast to continue to lead global growth in the coming years. Emerging Asia should outpace other world regions in terms of GDP growth again this year with 5.7% growth forecast.

The two largest Asian economies are expected to lead the way. India’s is forecast to grow 7.5% this year, and China 6.6%, despite the slowdown in China’s economy, driven by a rebalancing of the economy towards services and consumption-led growth.

Against this background, businesses are focusing on the protection of their receivables’ portfolio from customers’ late payment.

As highlighted in the October 2016 Atradius Payment Practices Barometer for Asia Pacific, around 90% of the suppliers respondents in Asia Pacific reported having experienced late payment of invoices from their B2B customers.

Due to this, 34% of the suppliers interviewed in Asia Pacific reported that they had to take specific measures to correct cash flow, and 33% had to pay their own suppliers late. 25% required additional financing from banks, factors or others to pay their own creditors, and 22% had to request a bank overdraft extension.

This may explain why 20% of the respondents in Asia Pacific think that cost containment and maintaining adequate cash flow will be the greatest challenges to the profitability of their business this year.

“Credit conditions across most emerging markets continue to tighten in response to elevated regional and global economic uncertainty,” says Eric den Boogert, Director of Atradius Asia. “Although economies in Asia-Pacific show decent economic growth compared to rest of the world, a record number of companies have seen delayed payments which is also supported by our own claims data.” 

 

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