Survey findings for Belgium

Nearly half of businesses in Belgium offer trade credit

Trade credit is currently involved in nearly 50% of the B2B sales of the businesses we surveyed in Belgium, chiefly in SME segments. Although this is below the 55% average for Western Europe, 41% told us that their credit sales increased by an average 36% after the onset of the pandemic. Nearly half of the businesses we spoke to reported no change in their approach to trade credit. A small percentage of respondents (10%) reported a decrease in B2B credit sales. Most businesses told us they offered credit to en- courage sales on the domestic market. This was reported by 57% of respondents, a little more than the 53% at regional level. 21% of the businesses we spoke to told us that they offered trade credit as a source of short-term finance (slightly lower than the regional average of 23%).

When we asked businesses why they might have refused a request for trade credit, 40% told us the main reason was due to deteriorating customer creditworthiness. This is significantly more than the 26% of businesses that reported the same in Western Europe. On average credit refusals amounted to nearly 30% of the total B2B sales value. Looking ahead, 28% said they would offer trade credit next year in a bid to grow foreign sales (regional average: 23%), demonstrating a slightly stronger desire to build exports than some of the country’s Western European neighbours. 23% of businesses told us that they plan to offer trade credit as a source of short-term finance to B2B customers, close to the 20% average in Western Europe overall. It is worth mentioning that only 4% of the respondents told us they plan to offer less trade credit to their B2B customers over the coming months, highlighting an important role that trade credit has in the trade relations of businesses in Belgium.

Businesses keep a tight grip on payment terms

Businesses in Belgium have a cautious approach to setting payment terms. Although some of the businesses we spoke to reported extending the length of their payment terms following the onset of the pandemic, the average length of terms are currently 31 days, representing no change to a year ago.

Three-quarters of businesses in Belgium set payment terms of up to a maximum of 30 days, by far the most commonly used period. This is followed by 15% of businesses that set terms from 31 to 60 days. 5% set terms from 61 to 90 days and the remaining 6% from 90 days or longer. 42% of respondents (compared to 47% in Western Europe) reported granting longer payment terms after the onset of the pandemic, most often up to 20 days longer. 52% told us they made no change to their payment terms, while 7% requested payment earlier than before the pandemic, on average 10 days earlier than last year.

Where businesses did offer longer terms, most explained this was to encourage domestic sales. This was reported by 32% of respondents, in line with regional averages. 24% of respondents told us they offered longer terms to encourage foreign sales (regional average 19%). Over the next six months, 34% of the businesses surveyed in Belgium said they plan to continue applying the same trade credit policies they adopted at the start of the pandemic to encourage domestic sales (regional average: 31%).

Most businesses in Belgium predict the greatest threats to business profitability in 2021 to include cost containment and the effective collection of outstanding invoices (reported by 48% and 47% respectively).

Atradius Payment Practices Barometer – November 2020

Late payments soar with an 81% year-on-year increase

Following the onset of the pandemic, late payments surged, with the total value of overdue invoices increasing from 26% to 47%. This 81% year-on-year increase represents a significant rise in the financing and administrative costs associated with carrying trade debts. On average, businesses in Belgium had to wait up to 27 days longer than the due date to turn overdue invoices into cash.

8% of the total value of B2B receivables was written off as uncollectable after the onset of the pandemic (slightly higher the 7% average for Western Europe). 7% of the total value of receivables was still outstanding at 90 days. On average, businesses lost nearly 90% of the value of their receivables that were not paid within 90 days.

The increase in late payments is reflected in the lengthening of DSO. 62% of businesses reported DSO increases of up to 10% (regional average 57%). 30% reported increases of more than 10% (regional average: 37%). Only 10% of businesses reported shorter DSO (regional average: 7%). DSO varies significantly across the industries. The consumer durables industry in Belgium calculated average DSO at 35 days, whereas the chemicals and construction materials sectors reported an average of 140 days.

Due to increased customer payment default during the pandemic, businesses told us they needed to take protective measures to avoid suffering liquidity shortages. 39% withheld payments to suppliers (regional average: 34%) and 24% spent more time, costs and resources to manage outstanding receivables (regional average: 37%).

Businesses work more closely with customers to complete credit checks

We used the survey to ask what type of credit information businesses customarily used to assess customer creditworthiness. We compared this to last year’s data to assess behaviour both before and after the onset of the pandemic. Last year, 30% normally relied on financial statements, as well as on bank and trade references (25% each). After the start of the pandemic, 42% began sourcing credit information directly from their customers more often than in the past (regional average: 38%).

This is an interesting trend and may signal stronger communication or closer working practices among businesses and their customers, or it may be a sign of the speed in which the recession took hold whereby more traditional sources of credit information quickly became out of date. As part of the credit check process, the majority of businesses we spoke to told us that their primary focus was on their customers’ ability to generate cash and weather economic volatility. They plan to continue with this area of focus moving forward, although many said they will also be monitoring their customers’ financial flexibility.

Most businesses are prepared to the absorb risk of non-payment of invoices

48% of respondents told us that in response to the economic downturn, they began to retain and manage the risk of payment default internally through self-insurance. 32% reported requesting payment guarantees more often. Over the coming months, 64% of businesses plan to rely on self-insurance with 50% favouring payment guarantees. 49% plans to send outstanding invoice reminders more often.

49% also plans to expand the role of trade credit insurance in their business strategy. Despite these changes to credit management strategies, 43% of businesses reported a drop in sales volume, more than the 23% that reported an increase. 53% of respondents reported a loss of revenue, with only 22% reporting growth. Businesses profitability also suffered with 33% reporting a decline.

Regardless of pandemic challenges, business confidence remains upbeat for 2021

Despite the uncertainties of the pandemic more businesses expressed optimism than pessimism about the outlook for their customers’ creditworthiness in 2021 (51% optimistic versus 21% pessimistic). 28% of respondents foresee no change. Businesses in Belgium are slightly more positive than their peers in this regard where 47% said they believed customer creditworthiness would improve next year.

This sense of optimism could also be seen in the survey responses to questions about the domestic and global economies. 57% of respondents expect the domestic economy to improve next year; 29% expects a decline.

45% anticipate the recovery of the global economy, whereas 33% are more pessimistic. A similar breakdown could be seen in attitudes towards international trade, with 49% predicting growth and 33% pessimistic the opposite.

Most businesses in Belgium predict the greatest threats to business profitability in 2021 to include cost containment and the effective collection of outstanding invoices (reported by 48% and 47% respectively).

Western Europe: top 4 measures to manage liquidity issues due to the impact of the pandemic

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