B2B Payments

APAC’s Late B2B Payments Problem Comes To Light

Industry players and policymakers across the globe are discussing their respective late B2B payments problems, and the data suggests that delayed supplier payments is a challenge no matter where businesses operate. New research from Atradius finds another geographic market grappling with its own late B2B payments problem: Asia Pacific (APAC).

Research published by Atradius last week, the October 2017 Atradius Payment Practices Barometer for Asia Pacific, found a whopping 90 percent of suppliers in the APAC region say they have experienced a delayed payment from B2B customers in the last year. Concern over increasing days sales outstanding is on the rise, too, researchers found and could hamper suppliers’ growth as the overall economic gains strengthen.

According to analysts, GDP across Asia is slated to expand 5.8 percent this year. But that doesn’t mean the economic outlook is positive for everyone: Indonesia and Singapore are showing signs of economic vulnerability, said Atradius, while India has positioned itself as a regional economic leader.

Regardless of economic status, businesses need to protect and strengthen cash flow management. And yet, delayed payments on B2B invoices across Asia Pacific is threatening that protection, with researchers finding an uptick in the percentage of past-due B2B invoices from 2016 to 2017.

On average, companies across APAC grant a 30-day payment window for their corporate customers (though payment terms in Japan, Taiwan and Hong Kong were longer than the regional average).

The 90 percent of suppliers that experienced late B2B payments in the last year equates to an average of 45.4 percent of total B2B invoice value being paid late for these suppliers. For domestic invoices, insufficient funds were the most common culprit behind businesses’ decisions to pay invoices late. For international payments, the complexity of the invoicing process led to payment delays.

On average, companies said they wrote off more than 2 percent of total B2B receivables as uncollectible, most often because companies that owe money to their suppliers go bankrupt or go out of business altogether — a scenario seen in nearly half of survey respondents. More than a third said they wrote off debts as uncollectible because they were too old, while nearly the same amount said they couldn’t get in contact with the customer.

China saw the greatest frequency of late B2B payments, with 93.9 percent of China-based survey respondents reporting they have dealt with a late payment in the last year. This trend was lowest in Japan, where 67.3 percent said they have been paid late in the last year. But India is the market in which late B2B payments make the most impact, Atradius said, with 56.4 percent of the total value of domestic B2B invoices and 50.3 percent of the total value of foreign invoices paid late.

Atradius did find that companies across the Asia Pacific region are taking steps to protect their cash flow management, especially as businesses around the globe prepare for the economic impacts of Brexit.

Nearly a third of APAC companies said they plan to “do more to protect their businesses from the impact of Brexit,” as well as from the economic slowdown across Asia and the rise of U.S. protectionism that is impacting global trade volumes — that’s more than companies in the Americas and Europe, researchers noted.

According to experts, late B2B payments, domestic or international, don’t place isolated pressures on individual suppliers; they have the potential to make nationwide, region-wide and global impacts.

“In 2018, global GDP growth is expected to expand 3 percent,” said Atradius Chief Market Officer Andreas Tesch in a statement. “Despite this positive outlook for the global economy, it is essential to highlight that rising protectionism, monetary tightening and the ongoing slowdown and rebalancing of China’s economy may increase the uncertainty that businesses face. This could further cloud the global insolvency outlook, weakening business confidence, investment and consumer spending. With this in mind, the main focus of any business should be on protection of cash flow.”

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