Approximately 39 Percent of American Invoices Paid "Late," Survey Reveals Payment Delays Continue to Plague U.S. Businesses; Freeze Cash Flow

HUNT VALLEY, Maryland, September 30, 2010 /PRNewswire/ -- Despite reports of the Great Recession's official end, late payments continue to plague the U.S. and global business communities and freeze companies' liquidity, according to the findings published in the "Payment Practices Barometer" global report.

Released this week by international trade credit insurer Atradius, the barometer assesses business-to-business (B-to-B) transactions and current payment practices of nearly 4,000 business leaders from 22 countries. The report highlighted late payments' domino effect on B-to-B dealings, transcending industries and borders.

The majority of survey respondents acknowledged that delayed or defaulted payments often required corrective measures to manage internal cash flow. In turn, these companies left waiting for payments said they had to postpone their own disbursements to suppliers. Even business leaders from countries like China, which never officially slid into a recessionary period, are reporting financial pains borne of late payments from their international buyers, according to the report.

"Delayed pay can create cash-flow problems for companies of all sizes, provoking far-reaching ripple effects that can drown companies in bad debt," said Thomas Beckwith, Vice President, Atradius Trade Credit Insurance, Inc. "While our barometer offers a snapshot of the current economic environment and its impact on business and payment practices, it serves as a reminder for business leaders to understand the payment behavior of their current and prospective customers to sustain cash flow and rebound from the recession."

In the U.S., respondents reported they are equally as likely to sell on cash as they are on credit terms. The report acknowledges that while this approach can remove credit risk and inject cash into the business operation, it also can diminish a business' ability to offer competitive terms. The Payment Practices Barometer attributes the United States' stance on cash-versus-credit provisions to lack of financial disclosure from the private business sector and concludes that without transparency and competitive terms, U.S. businesses can expect continuing trade deficits as overseas exporters willingly trade on credit.

    Additional U.S. survey findings included:

    - Approximately 39 percent of American invoices were paid "late"

    - Fifty-two percent of U.S. respondents reported customers had asked for
      extended payment terms over the last six months. Forty-eight percent
      had delayed payment without prior agreement.

    - U.S. respondents' main criteria for selling on credit terms are:
      "credit check," "track record" and "reputation"

    - Average domestic payment term: 28 days Average domestic payment
      duration: 28 days Average foreign payment term: 36 days Average foreign
      payment duration: 32 days

    - The most likely impact of overdue invoices was the need to "take
      specific measures to correct cash flow" (43 percent of respondents)

    - Thirty-five percent of U.S. respondents who changed their credit
      management practices during the past year increased their "down/advance
      payments"

    - American respondents are most satisfied with their business
      relationships with Canadian and German customers

    - Average Days Sales Outstanding (DSO) in the U.S. was 61 days.
      Fifty-nine percent of American respondents experienced no change in DSO
      during the past year, whereas 12 percent experienced an increase in DSO
      over the past year

"Cash flow management is, in a word, critical for the financial survival and growth of a business and our domestic economy," said Beckwith. "With traditional lending sources maintaining a tight grip on available cash, businesses should explore tools like trade credit insurance that cannot only protect them from bad debt, but also can be used to secure working capital lines and more competitive financing rates by leveraging their insured accounts receivable."

The full "Atradius Payment Practices Barometer" survey and its methodology can be downloaded from http://www.atradius.com

About Atradius:

The Atradius Group provides trade credit insurance, surety and collections services worldwide, and has a presence through 160 offices in 42 countries. Atradius has access to credit information on

52 million companies worldwide and makes more than 22,000 trade credit limit decisions daily. Its products and services aim to reduce its customers' exposure to their buyers who cannot pay for the products and services they purchase. With total income of more than EUR 1.7 billion and approximately 31 percent share of the global trade credit insurance market, its products help protect companies throughout the world from payment risks associated with selling products and services on credit.

    For further information:

    Kathy Farley
    Atradius Corporate Communications
    Tel: +1-410-568-3817
    Email: [email protected]

    http://www.atradius.us

SOURCE Atradius