Trade Credit Risk from Foreign Late Payment on the Rise in Eastern Europe
AMSTERDAM, May 19, 2016 /PRNewswire/ --
- Liquidity position of businesses in Eastern Europe challenged by foreign late payment
- Exposure to trade credit risk from export invoices increased by 19% on annual basis
- 20% of respondents in the region concerned about worsening DSO over next 12 months
The Eastern European economy is expected to continue growing at 1.1% this year. However the insolvencies picture is erratic with a rising trend in late payment of invoices on exports impacting cash flow.
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The 2016 Atradius Eastern European Payment Practices Barometer survey shows that around 20% of businesses in the region, compared to 16% in Western Europe, are concerned about their cash flow levels this year. The survey reveals, businesses' concern about cash flow, is likely to stem from a higher exposure to trade credit risk arising from late payments by foreign business-to-business (B2B) customers. The average total value of export invoices unpaid at the due date increased 19% to 40.8% from 34.2% last year. The average value of overdue domestic invoices rose 9% to 45.0% from 41.2% last year. This may have an adverse impact on the liquidity position of businesses in the region.
The average total value of survey respondents' export invoices unpaid after 90 days past due exceeded the 20% regional average in the Czech Republic (22.3%), Turkey (26.4%), and Poland (29.8%). Extended payment delays can increase the risk of payment default and negatively impact cash flow. This may explain why 20% of respondents in Eastern Europe are concerned about their DSO worsening over the next 12 months. This percentage is highest in Turkey (33%) and Poland (27%).
The increase in foreign trade credit risk in Eastern Europe caused a knock-on effect on the supply chain. Around 30% of respondents in the region (25% in Western Europe) paid their own suppliers late due to slow payment by their customers. 11.0% of respondents (7.6% in Western Europe) said late payment from B2B customers caused their business to stop growing.
Andreas Tesch, Chief Market Officer of Atradius N.V. stated, "Global economic growth is forecast to slow to 2.4% in 2016, down from 2.6% last year. A significant boost to growth has not come yet, and we are faced with another year of high insolvency and credit risks. Across advanced economies no change in insolvencies is forecast, while increases are expected in most major emerging markets. Limiting payment default risks through a sound receivables management strategy, comprising credit insurance, can be of great value in protecting business profitability".
The Atradius Eastern European Payment Practices Barometer survey looks at the payment practices of B2B customers of approximately 1,100 businesses in five countries (Czech Republic, Hungary, Poland, Slovakia and Turkey). The survey examines businesses' use of credit management tools, perceived challenges to profitability, and payment practices by industry and business size.
The complete report highlighting the findings of the 2016 edition of the Atradius Payment Practices Barometer for Eastern Europe can be found on the atradius.com website.
About Atradius
Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in 50 countries. Atradius has access to credit information on 200 million companies worldwide. Its credit insurance, bonding and collections products help protect companies throughout the world from payment risks associated with selling products and services on trade credit. Atradius forms part of Grupo Catalana Occidente (GCO.MC), one of the leading insurers in Spain and worldwide in credit insurance.
SOURCE Atradius N.V.
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