Overview of payment practices

By industry

AGRI-fOOD

late payments and cash flow

  • Late payments in the Hungarian agri-food industry affect nearly 42% of the total value of B2B invoices in the industry (more than double compared to last year’s 20%). Due to the pandemic-induced economic crisis, 45% of respondents in the industry reported having to wait longer to cash in overdue invoices, up to 27 days past the due date on average.
  • Average DSO increases of up to 10% were reported by 62% of respondents. Increases of DSO above 10% were reported by 33% of businesses in the agri-food sector. Currently DSO in Hungary stands at a 103-day average (in line with the average for the industry in Eastern Europe).
  • 54% of the survey respondents in the industry told us the pandemic-induced economic crisis has negatively impacted their revenue (regional average: 57%); while 57% reported a negative impact on cash flow (in line with the regional average). 33% reported no significant impact on their business (16% in Eastern Europe).
  • 36% of agri-food businesses delayed paying suppliers to protect the business from liquidity shortages due to late payments, (regional average: 46%).

Approach to credit quality assessments

  • After the onset of the pandemic-led economic crisis, businesses in the Hungarian agri-food industry began to obtain credit information directly from their customers more often (reported by 43% of businesses). This data along with information coming from the customer’s financial statements (51%) are now the most commonly used sources for assessments of creditworthiness.
  • Once credit information is collected, priority is given to evaluating the customer’s payment history, debt capacity and ability to generate cash. The survey respondents from the industry said that over the next six months they would place a stronger focus on these areas than they had before the pandemic.

Approach to credit management

  • Following the onset of the pandemic-led economic crisis, survey respondents in the Hungarian agri-food industry increased their efforts to minimise the risk of payment default by asking for cash payments or by seeking payment guarantees. Self-insurance is the most commonly used credit management technique. Agri-food businesses plan on continuing with these approaches over the next six months.
  • More respondents in the industry expect their B2B customers’ creditworthiness to improve (71%) than those expecting deterioration (5%) over the next six months.
  • According to industry respondents, the greatest potential challenges to profitability in 2021 include: fall in demand (cited by 48% of respondents, in line with the average for the region) and collection

2021 industry outlook

  • More respondents in the Hungarian agri-food industry (53%) expect the domestic economy to improve over the next six months than those expecting it to get worse (32%). They also expressed optimism about the outlook for the global economy (45% optimistic, 26% pessimistic) and international trade (56% optimistic, 23% pessimistic).

CHEMICAlS

late payments and cash flow

  • Late payments in the Hungarian chemicals industry affect nearly 59% of the total value of the B2B invoices (up from last year’s 29%). Due to the pandemic-triggered economic crisis, 53% of respondents reported having to wait longer to cash in overdue invoices, on average up to 20 days longer than the due date.
  • Average DSO increases of up to 10% were reported by 61% of respondents. Increases of DSO above 10% were reported by 27% of businesses in the chemicals sector. Currently DSO in the Hungarian chemicals industry stands at a 163-day average (well above the 91-day average for the industry in Eastern Europe).
  • 55% of the survey respondents in the industry (vs. 58% of respondents at a regional level) told us the pandemicinduced economic crisis had a negative impact on their revenue. 36% reported a negative impact on cash flow (49% at a regional level).
  • To contain liquidity issues caused by late payments, respondents from the Hungarian chemicals industry most often resorted to hiring freezes (44% of respondents: regional average, 37%). 36% of chemicals businesses reported delaying payments to their suppliers (compared to 43% of respondents in the region).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Hungarian chemicals industry did not change the way they approached credit checks and continued to rely on financial statements provided by customers (48% of respondents) and trade references (44%).
  • Once credit information is collected, respondents in the industry give priority to the assessment of the customer’s payment history, debt capacity and ability to generate cash. Chemicals businesses told us they plan to maintain this approach over the next six months, paying attention to customer liquidity levels and ability to meet financial obligations in the short term.

Approach to credit management

  • Following the onset of the pandemic-led economic crisis, survey respondents in the Hungarian chemicals industry worked to minimise the risk of payment default by requesting payment guarantees, outsourcing of debt collection more often and seeking debt securitisation. 60% of respondents also reported avoiding concentrations of risk. Self-insurance is widely used in the industry, although the survey results reveal a growing interest in credit insurance.
  • Significantly more respondents in the industry expect their B2B customers’ creditworthiness to improve (63%) than those expecting deterioration (17%) over the next six months.
  • Businesses in Hungary’s chemicals sector consider the following issues to be the greatest challenges to profitability over the next six months: maintaining cash flow (43%: regional average 35%), collection of outstanding invoices (38%, in line with regional average).

2021 industry outlook

  • Significantly more respondents in the industry (63%) expect the domestic economy to improve over the next six months than those expecting it to get worse (17%). The same goes for the future of the global economy with 62% expressing optimism, versus 23% with pessimistic views and of international trade (69% optimistic, 20% pessimistic).

ELECTRONICS

late payments and cash flow

  • Late payments in the Hungarian electronics industry affect 42% of the total value of B2B invoices (compared to last year’s 24%). Due to the pandemic-triggered economic crisis, 40% of respondents reported having to wait longer to turn overdue invoices into cash, up to 14 days on average.
  • Average DSO increases of up to 10% were reported by 75% of respondents. Increases of DSO above 10% were reported by 19% of businesses in the electronics sector. Currently DSO in the industry stands at a 99-day average (well below the 108-day average for the industry in Eastern Europe).
  • Slightly fewer respondents in the Hungarian electronics industry (53%) than overall in Eastern Europe (59%) told us the pandemic-induced economic crisis had a negative impact on their revenue. A negative impact on cash flow was reported by 34% of respondents, compared to 46% at regional level.
  • To protect the business from liquidity shortages due to late payments, most industry respondents reported needing to delay payments to their own suppliers as well as enacting hiring freezes (34% in each case).

Approach to credit quality assessments

  • The onset of the pandemic-led economic crisis has not changed the way businesses in the Hungarian electronics industry approached the assessment of their customers’ credit quality. This is chiefly based on financial statements obtained directly from their customers, along with bank and trade references.
  • Once credit information is collected, priority is given to the evaluation of a customer’s payment history, capacity to meet financial obligations and financial flexibility. Businesses in the electronics industry told us their approach would remain unchanged over the next six months.

Approach to credit management

  • Following the onset of the pandemic-led economic crisis, survey respondents in the Hungarian electronics industry increased their efforts to reduce the impact of potential payment defaults on the business. The steps they took included: requesting payment guarantees, increasing the use of outstanding payment reminders, outsourcing debt collection and employing trade credit insurance. Businesses told us they plan to continue the same approach over the next six months.
  • More respondents expect their B2B customers’ creditworthiness to improve (58%: regional average 49%), than those expecting deterioration (19%) over the next six months.
  • More respondents in the Hungarian electronics industry (40%) than in Eastern Europe (30%) consider the collection of outstanding invoices as the greatest challenges to profitability in 2021.

2021 industry outlook

  • Significantly more respondents (69%) expect the domestic economy to improve over the next six months than those expecting it to get worse (20%). The same goes for the future of the global economy (50% optimistic, 32% pessimistic) and of international trade (57% optimistic, 18% pessimistic).

STEEL-METALS

late payments and cash flow

  • Due to the pandemic-induced economic crisis, late payments in the Hungarian metals industry affect 45% of the total value of B2B invoices (significantly up from last year’s 24%). 77% of respondents reported having to wait longer to turn overdue invoices into cash, up to 34 days on average.
  • Due to the upsurge in late payments, average DSO increases of up to 10% were reported by 60% of respondents. Increases of DSO above 10% were reported by 39% of businesses in the metals sector. Currently DSO in the industry stands at a 60-day average (in line with the 62- day average for the industry in Eastern Europe).
  • 84% of the survey respondents in Hungary (compared to 68% at regional level) told us the pandemic-induced economic crisis had a negative impact on their revenue. 46% of respondents reported negative impact on cash flow (in line with the industry average at regional level).
  • To contain the costs incurred by late payments, respondents from the Hungarian metals industry most often resorted to suspending deliveries until payment of invoices (53% of respondents: regional average 30%).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents afrom the Hungarian metals industry reported no change in the way they approached assessments of their customers’ credit quality, which are chiefly based on financial statements, bank and trade references.
  • Once credit information is collected, priority is given to the evaluation of the customer’s payment history and to its ability to generate cash. Survey respondents told us that over the next six months they plan to complement this approach with assessments of a customer’s debt capacity.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Hungarian metals industry intensified their efforts to reduce the impact of potential payment defaults on the business. The steps they took included: requesting payment guarantees, outsourcing collection activities and using trade credit insurance more often. They plan to follow the same approach over the next six months.
  • Fewer respondents in the Hungarian metals industry (28%) than in the industry in Eastern Europe overall (44%) expect their B2B customers’ creditworthiness to improve over the next six months. 48% of respondents in the industry do not expect any change.
  • According to industry respondents, the continuation of the economic crisis is the greatest potential challenge to profitability in 2021. This was reported by 41% of respondents, compared to 37% in Eastern Europe.

2021 industry outlook

  • Significantly more respondents (50%) expect the domestic economy to deteriorate over the next six months than those expecting it to get better (7%). Businesses are optimistic about the future of the global economy (44% optimistic, 10% pessimistic) as well as of international trade (40% optimistic, 10% pessimistic).

46%

of the total value of the B2B invoices issued by businesses polled in Hungary remained unpaid at the due date. This compares to last year's 23%.

Atradius Payment Practices Barometer – June 2020

CONSTRUCTION MATERIALS

late payments and cash flow

  • Late payments in the Hungarian construction materials industry affect 40% of the total value of B2B invoices (up from last year’s 17%). Due to the pandemic-triggered economic crisis, 35% of respondents reported having to wait longer to turn overdue invoices into cash, on average up to 20 days past the invoice due date.
  • Average DSO increases of up to 10% were reported by 60% of respondents. Increases of DSO above 10% were reported by 40% of businesses in the construction materials sector. Currently DSO in the industry stands at a 90- day average (well above the 60-day average for the industry in Eastern Europe).
  • 40% of the survey respondents told us the pandemicinduced economic crisis had a negative impact on their revenue (regional average: 61%). 22% of respondents reported a negative impact on cash flow (compared to 42% in the industry at regional level).
  • To contain the costs incurred by late payments, respondents from the Hungarian construction materials industry most often delayed payments to suppliers (27% of respondents, compared with 45% at the regional level).

Approach to credit quality assessments

  • Respondents in the industry changed the way they approached assessments of their customers’ credit quality after the onset of the pandemic-induced economic crisis. They began to make wider use of information provided directly by the customer about its credit standing, adding to the insights available in both financial statements and bank references. This latter, however, remain the credit information sources customarily used by businesses in the Hungarian construction materials industry.
  • After the onset of the pandemic recession, respondents from the Hungarian metals industry reported no change in the way they approached assessments of their customers’ credit quality, which are chiefly based on financial statements, bank and trade references.
  • Once credit information is collected, priority is given to the evaluation of the customer’s payment history and to its ability to generate cash. Survey respondents told us that over the next six months they plan to complement this approach with assessments of a customer’s debt capacity.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Hungarian construction materials industry intensified their efforts to reduce the impact of potential payment defaults on the business. In addition to resorting more often to self-insurance, the steps they took included: sending more outstanding invoice reminders, requesting letters of credit and using factoring. Businesses told us they plan to continue this approach for the next six months.
  • Respondents in the industry have a clear-cut opinion about their B2B customers’ creditworthiness outlook over the next six months. 74% expect improvement, while only 8% expect deterioration.
  • According to 51% industry respondents, the greatest potential challenge to profitability in 2021 is the collection of outstanding invoices. This opinion is shared by the same percentage of businesses in the construction materials industry in Eastern Europe overall.

2021 industry outlook

  • Significantly more respondents in the industry (59%) expect the domestic economy to improve over the next six months than those expecting it to deteriorate (13%). Opinions on the future of the global economy are evenly split (32% optimistic, 32% pessimistic) while slightly more are optimistic about international trade counts (42% versus 34% who are more pessimistic).

Download the report

Can we help you with information about other questions you have about managing your receivables?

Share this article

Continue reading