Payment practices report
Survey results for Canada
The Atradius Payment Practices Barometer is an annual survey that assesses business payment behaviour throughout the world.
The survey explores a range of topics including payment terms, payment delays, credit sales, and DSO (Days Sales Outstanding), results of which provide a good indication of outlook for businesses in Canada.
Country Manager for Canada commented on the report
“COVID-19’s full impact on Canadian businesses remains a mystery. Atradius’s Payment Practices Barometer survey of Canadian businesses shows firms are attempting to minimize their risks by increasing the use of B2B sales made on credit while also shifting toward more stringent payment terms.
Overall, Canadian businesses expect payment practices to deteriorate in the near future. Survey respondents reported a staggering 86% increase in late payments compared to last year. Liquidity issues are common, accounting for many overdue invoices. That said, all signs currently point toward a recovery in the next months, and half of the survey respondents feel optimistic about short-term growth and profits.
Additional time is needed to fully assess the economic impact of the COVID-19 pandemic on the Canadian economy. GDP contracted in both the first and second quarters of this year, despite the measures taken to help mitigate the downside risks and provide economic stimulus through financial support to businesses. That said, it is thought that these interventions will help in the longer term, and economic growth in Canada is expected to bounce back over the coming months.
Against this backdrop of uncertainty, it is essential that businesses navigate these challenging economic times with a strategic approach to credit management. This needs to include measures aimed at ensuring adequate cash flow levels and a sound liquidity position to guarantee or support the continuity of the business.
Key takeaways from the report
Value of B2B credit sales on the rise in Canada
The total value of B2B sales made on credit increased by 6% compared to the year prior, with a greater emphasis on offering credit to domestic rather than foreign customers. Interestingly, the increase in amount of credit sales corresponded with a reduction in payment terms, possibly reflecting cautiousness and an attempt to minimise the risk of payment defaults where possible. This trend was absent from the Canadian steel/metals industry, where more than 70% of respondents expressed a preference for cash.
Inefficiencies in Canadian banking system blamed for many late payments A sizable proportion of survey respondents cited inefficiencies in Canada’s banking system as a reason for late payments. This was particularly evident in the agri-food and chemicals industries, both of which reported that an average of 40% of the total value of B2B invoices were overdue, and both laying partial blame on banking inefficiencies. Canada’s banking landscape is currently undergoing reform with a modernisation programme. It will be interesting to see how this affects future B2B payments moving forward.
Most industries in Canada expect payment practices to deteriorate in coming months Most of the survey respondents expressed a negative view of the future of their B2B customers’ payment practices. Overall, 27% expected this to deteriorate, in contrast to just 10% who anticipated improvement. This pattern was echoed across the business sector, with the exception of the construction materials industry, where 55% of survey respondents expect the total amount of unpaid invoices to decline over the coming months.
The majority of businesses predict growth in sales and profits More than 50% of respondents in every industry we surveyed, with the exception of the services industry, expressed optimism about the future and believed their sector would experience growth in sales and profits during the coming year. This opinion was held by 45% of respondents in the services industry. In the steel/metals industry, for example, 57% of those surveyed expected to see growth next year.