Late payments, back to bedevil firms in Western Europe — and eastern Europe, too, for that matter. A series of reports over recent days show evidence that collecting on B2B receivables remains a stubborn problem.
In one study, through its Payments Practices Barometer, Atradius found that, across respondents from Western Europe, there has been a boost in past due invoices after only a slight increase seen from 2016 to 2017. The proportion of past due invoices now stands at 41.8 percent after having boosted from 39 percent in 2016 to 40.7 percent in 2017. Germany and Great Britain are among the countries with higher past due invoices than had been seen previously. The average days sales outstanding (DSO) ratio was 44 days in 2018, unchanged from 2017.
A majority of respondents, found the survey, have been hit by the fallout from those invoices, as they have had to postpone making their own payments, experiencing a ripple effect. The main reason for those payment delays, as noted this past week? Insufficient funds availability. Write-offs were stable at about 1.3 percent, with customer bankruptcy the main culprit.
Credit sales waned a bit this year, at least on the B2B side, as that activity was 37.4 percent in the most recent reading, down from 38.8 percent in 2017. Within that headline number, credit sales were off in Ireland by 7.2 percent and Great Britain by 6.7 percent.
The U.K. was the country with the highest proportion of past due invoices, at 48.8 percent, followed by France at 47.5 percent.
In a statement that accompanied the report, Andreas Tesch, Atradius N.V. chief market officer, said that, "The outlook for global growth is forecast to lose steam, warranting a more cautious outlook for 2019. This will likely put the brakes on the downward trend in global insolvencies with only a 1 percent decline forecast for next year. All this points to deterioration of the worldwide outlook for trade credit risk on the horizon. Protection of receivables is, therefore, of paramount importance for businesses. Credit insurance enables businesses to manage the inevitable risks of selling on credit, and can help them grasp growth opportunities through safe and profitable trade."
Other Studies Show The Same Tale
Drilling down a bit, other metrics and studies tell roughly the same tale. As noted by EOS KSI through its own European Payments Practices 2018 survey, as many as “every fourth” payment — or 27 percent — is delayed to Slovak companies or never gets paid. This is the highest among all countries in both Western and Eastern Europe, the SITA newswire wrote last week — 3,400 companies from 17 European countries responded to the survey.
In Romania, that tally is 26 percent, which means those respondents are among the worst when it comes to late payments. The survey noted that, on average, 21 percent of payments are done late or not done at all. The east leads the west when it comes to late payments, at 22 percent versus 19 percent.
“There may be several reasons why Slovak companies have the biggest problem with payments,” said EOS KSI Slovensko Economic Manager Peter Hetteš to SITA. “For example, our survey has shown that in the long term, they offer slightly longer maturity than average, which may lead to worse payment discipline.”
On the flip side of the coin, Denmark has the lowest late payment tally at 15 percent. Switzerland, Spain and Germany are each at 18 percent.