In Eastern Europe’s B2B Arena, Late Payments On The Rise

Late payments are on the rise in Eastern Europe, according to Atradius’ latest report on global debt collection practices — and late payments are being used as a form of financing. Elsewhere, in the United Kingdom, late payments are impacting healthcare.  

As it turns out, in Europe, late payments in the B2B space seem to be a continent-wide problem.

In a wide-ranging survey of B2B activity in Eastern Europe, trade credit insurer Atradius reported that payment delays tied to insufficient funds have been on the rise in the region, up 10 percent over last year. As many as 68 percent of firms surveyed cited that issue, and 31 percent of firms said their B2B customers use late payments as a form of financing.

In further detail, 64 percent of respondents said collecting on receivables could be problematic due to those counterparties filing for bankruptcy or going out of business, up from 55.8 percent the year before. Electronic invoices help matters, stated the companies, as they are able to get paid faster. However, risk increases as Days Sales Outstanding (DSO) grow, and the report noted that GDP growth is moderating, which means credit risk increases.

Andreas Tesch, chief market officer of Atradius, said in a statement, “Globally, 2018 promises to be another year of strong growth, with global GDP growth pushing up to 3.2 percent, the highest level since 2011. However, the chances of long-term economic growth are deteriorating for the export-oriented economies of Eastern Europe, which are closely ingrained in European supply chains.”

Late Payments Hit Healthcare, Too

Separately, in the U.K., Health Service Journal (HSJ) reported that a third of acute trusts (or hospital trusts) pay suppliers late and, in doing so, break laws governing late payments.

Under the terms of contract mandates, public enterprises have to pay suppliers within 30 days, stated the site, yet “dozens of hospital providers have resorted to delaying payments to manage their cash flows.”

In terms of the data, as many as 44 out of 135 acute trusts pay fewer than half of invoices within 30 days as measured over a period stretching from 2017 to 2018. That is worse, it should be noted, than the 27 percent seen from 2016 to 2017 and the 19 percent from 2015 to 2016.

HSJ said the trusts have a financial incentive to hang on to invoice payments, as charges levied on them are reduced if they hold higher levels of cash. Some suppliers have said they will not deliver supplies due to the continued problems of late payments. In some cases, patient safety is risked as those supplies have been held back.

Separately, but also in the U.K., Kier, the second-largest contractor in the U.K. post-Carillion implosion, said through its CEO Haydn Mursell that the firm tends to pay its bills before being paid by clients. As reported in Building, the company has been taking roughly 54 days to pay invoices, within a range that Building terms “the slow payers league” with Balfour Beatty, the biggest contractor.

The executive stated, “Quite simply, we can only pay the supply chain when the client pays us because, otherwise, we don’t have the funds from the client to settle with the supply chain. At the moment, our average payment terms to our supply chain is 54 days. [Our] payment is quicker on average than the client pays us. So, we’re already paying our supply chain quicker than our clients pay us so we’re doing our bit for the industry in that regard.”

The company has also utilized supply chain finance, and that method means suppliers pay a fee to be paid by 21 days, better than the 60-day terms usually in place. That comes as the company’s typical project value comes at £8 million (more than $10.4 million USD) and, in reference to those suppliers, “because they’re paid after 21 days, or whenever suits their own particular payroll demands, [that] is very, very attractive to them.”