Some markets, especially the U.K. and Australia, have made it a point to combat late supplier payments. But in other markets, the issue continues to worsen. According to the latest data from Atradius, supplier payment delays are growing longer across Western Europe thanks to a combination of factors.
“With traditional financing more difficult to access in recent years, buyers have been more aggressive in using supplier invoices as bridge financing,” said Atrocious N.V. Chief Market Officer Andreas Tesch in a statement. “However, with margins and cash flow pressure mounting for suppliers, reducing credit sales is sometimes the only option they feels available to them to regain control of their finances. This is a good practice in cases where buyer creditworthiness is deteriorating; however, in other cases, insights into other options for improving your credit portfolio may open profitable new opportunities.”
Overall, Europe has seen no improvement in business insolvency levels or on the cost of uncollectible invoices. Most businesses in Europe simply see this issue as part of the cost of doing business, Atradius said — even as Brexit, U.S. protectionist measures and economic slowdown in China continue to impact global markets.
“One of the most telling outcomes of this study is that for many companies, domestic sales generate a substantial share of their uncontrollable receivables,” Tesch added. “It’s just as important to protect your business from domestic defaults as it is from foreign payment defaults.”
PYMNTS breaks down the data Atradius released last week to get the picture of delayed supplier payments and cash flow management challenges across Europe.
90 percent of EU businesses have experienced payment delays on B2B invoices, and that includes both foreign and domestic invoices, according to Atradius. These delayed payments impact about 41 percent of the value of total receivables, researchers found, an increase from 39 percent a year ago. As a result, sales made on credit is on the decline.
60 percent of firms surveyed won’t change their credit management behavior, even with geopolitical uncertainties like Brexit.
59 days is the average it takes a domestic corporate buyer to pay its supplier, an increase from 54 days in 2014. For foreign buyers, the average is 53 days, up from 52 days in 2014. This data is interesting, considering businesses surveyed tend to trust their domestic buyers more than they do their foreign ones, despite domestic buyers taking longer to pay.
43.5 percent of businesses said insufficient availability of cash as the top reason invoices are paid later.
24.4 percent of firms said buyers think the payment process is too complex, especially when it comes to foreign transactions. This statistic is telling, considering the oft-mentioned friction associated with cross-border payments. While Europe has aimed to facilitate cross-border payments within the Eurozone thanks to SEPA, overseas, B2B payments continue to struggle to overcome friction — critical to achieving faster payments.
1.3 percent of the total value of invoices by those surveyed is uncollectible, relatively stable compared to 1.4 percent in the 2016 survey, Atradius said. According to researchers, businesses appear to have accepted that this financial loss is simply the cost of doing business. Researchers noted that there was similarly no improvement in the insolvency rate across Europe.