Overview of payment practices

Impact of the COVID 19-induced economic crisis on industries

Agri-food

Late payments and cash flow

  • Late payments in the Romanian agri-food industry affect nearly 46% of the total value of B2B invoices (compared to last year’s 29%). Due to the pandemic-led economic crisis, 36% of respondents in the industry reported having to wait longer to cash in overdue invoices, on average up to 22 days past the due date.
  • Since the onset of the pandemic, 62% of respondents reported average DSO increases up to 10%. Increases of DSO above 10% were reported by 21% of businesses in the agri-food sector. Currently DSO in Romania stands at a 108-day average (above the 103-day average for the industry in Eastern Europe).
  • Significantly more survey respondents in the Romanian agri-food industry (64%) than in the industry at regional level (53%) reported that the pandemic-induced economic crisis had a negative impact on their cash flow.
  • To protect the business from liquidity shortages, therefore, most of the respondents in the industry in Romania (46%, lower than 43% in the industry in Eastern Europe) needed to delay payments to their own suppliers.
  • 42% of agri-food businesses in Romania delayed paying their own suppliers to protect the business from liquidity shortages due to late payments from their B2B customers (regional average for the agri-food industry: 46%).

Approach to credit quality assessments

  • After the onset of the pandemic-led economic crisis, businesses in the Romanian agri-food industry began to obtain credit information directly from their customers more often (reported by 33% of businesses). This data along with information coming from the customer’s financial statements (53%) are now the most commonly used sources for assessments of creditworthiness.
  • Once credit information is collected, businesses tend to first evaluate a customer’s financial flexibility, followed by debt capacity and ability to generate cash. Over the next six months, businesses surveyed in the Romanian agri-food industry told us they plan to place a stronger focus on these areas than they had before the pandemic.

Approach to credit management

  • 74% of survey respondents in the agri-food industry offered discounts for early payment of invoices, although 81% of businesses told us they plan to practise self-insurance. 41% reported asking for letters of credit and guarantees of payment more often and others said they used factoring and trade receivables securitisation. Over the next six months, respondents in the industry plan to continue using the same credit management tools and techniques.
  • Fewer respondents in the industry in Romania (48%) than in Eastern Europe overall (54%) expect their B2B customers’ creditworthiness to improve over the next six months.
  • According to industry respondents, the greatest potential challenges to profitability in 2021 include: containing costs (50% versus regional average of 42%), the continuation of the recession, (48% versus regional average of 33%).

2021 industry outlook

  • More respondents in the Romanian agri-food industry (49%) expect the domestic economy to improve over the next six months than those expecting it to get worse (34%). This contrasts with industry views about the global economy where 27% expressed optimism and 60% pessimism, (this latter compared to 43% at regional level). There was a similar pattern in their views on international trade where were 33% optimistic and 57% pessimistic, (the latter compared to 42% in the industry at a regional level).

Chemicals

Late payments and cash flow

  • Late payments in the Romanian chemicals industry affect nearly 49% of the total value of the B2B invoices (up from last year’s 28%). Due to the pandemic recession, 42% of respondents in the industry reported having to wait longer to cash in overdue invoices, on average up to 21 days longer than the due date.
  • Average DSO increases of up to 10% were reported by 44% of respondents in the chemicals sector. Increases of DSO above 10% were reported by 42% of businesses. Currently DSO in the industry stands at a 67-day average (well below the 91-day average for the industry in Eastern Europe).
  • Significantly more respondents in Romania (53%) than at the regional level (46%) told us the economic crisis had a negative impact on their profitability.
  • To contain liquidity issues caused by late payments, respondents from the Romanian chemicals industry told us they most often delayed payments to suppliers, (56%, regional average 43%) and enacted hiring freezes (43%, regional average: 37%).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Romanian chemicals industry changed the way they approached credit checks. They began to source information directly from customers more often, such as customer financial statements (61% of respondents), supplementing this with other sources such as reports from specialist credit agencies (41%).
  • Once credit information is collected, most attention is paid to the customer’s payment history and ability to generate cash. Industry respondents told us they plan to maintain this approach over the next six months in addition to monitoring customer accounts going forward.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Romanian chemicals industry tried to reduce the impact of payment default by: increasing requests for payment guarantees (63% of respondents), offering of discounts for early payment of invoices (62%), sending outstanding payment reminders (58%). Looking forward to the next six months, a growing number of businesses in the chemicals sector told us that they are considering both self-insurance and credit insurance.
  • Significantly more respondents in the industry expect their B2B customers’ creditworthiness to improve (57%) than those expecting deterioration (21%) over the next six months. This opinion is in line with that of their industry peers in the region.
  • More than half of businesses in the Romanian chemicals industry (53%) believe containing costs will be the greatest challenge to profitability in 2021, substantially more than their industry peers in Eastern Europe (40%)

2021 industry outlook

  • More respondents in the industry in Romania (54%) expect the domestic economy to improve over the next six months than those expecting it to get worse (42%). Businesses are pessimistic about the outlook for the global economy (40% optimistic, 49% pessimistic, compared to 42% in EE) and for international trade (38% optimistic, 48% pessimistic, compared to 39% in EE).

Construction

Late payments and cash flow

  • Late payments in the construction industry in Romania affect 45% of the total value of B2B invoices (a significant increase on last year’s 29%). Most of respondents (70%) told us that the economic crisis had no impact on the average time it takes them to convert overdue invoices into cash, now at 15 days past the invoice due date. 18% of respondents reported having to wait longer.
  • Since the onset of the pandemic recession, average DSO increases of up to 10% were reported by 67% of construction industry respondents. Increases of DSO above 10% were reported by 28% of businesses. Currently DSO in the industry stands at a 95-day average (below the 112- day average for the industry in Eastern Europe).
  • More respondents in the Romanian construction industry (51%) than overall in Eastern Europe (44%) told us the pandemic-induced economic crisis had a negative impact on their profitability.
  • Late payments caused businesses in Romania’s construction industry to reduce their workforce (42% of survey respondents: East European industry average 29%).

Approach to credit quality assessments

  • After the onset of the pandemic recession, construction businesses in Romania changed the way they approached credit checks and began to engage directly with their customers more often. Financial statements and other data provided directly from the customer are now the most commonly used sources for creditworthiness assessments.
  • Once credit information is collected, priority is given to the evaluation of the customer’s payment history, ability to meet financial obligations and financial flexibility. Businesses in Romania’s construction industry tell us this approach will remain unchanged over the next six months.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Romanian construction industry tried to reduce the impact of payment default by: increasing the frequency of outstanding payment reminders, adjusting payment terms and practising self-insurance. Businesses polled in the industry also said they will consider using trade credit insurance over the next six months.
  • Businesses in the Romanian construction industry are divided about the outlook for their B2B customers’ creditworthiness and payment habits. 38% expect to see an improvement with the same percentage braced for deterioration. At regional level, businesses are optimistic about the outlook for their B2B customers’ creditworthiness and payment habits in the short term.
  • Cash flow adequacy as well as cost containment are considered the greatest challenges to profitability in 2021 by 44% of construction industry businesses in Romania. This compares to 41% and 38% of respondents in EE overall respectively.
  • The Romanian construction industry considers the greatest challenges to profitability in 2021 to include containing costs and maintaining cash flow (as reported by 44% of survey respondents). This compares to 41% and 38% of respondents in Eastern Europe overall respectively.

2021 industry outlook

  • Significantly more respondents in Romania (58%, regional average: 44%) expect the domestic economy to get worse over the next six months than those expecting it to get better (27%). The same goes for opinions on the future of the global economy (31% optimistic, 57% pessimistic, regional average: 48E) and for international trade (28% optimistic, 58% pessimistic, regional average: 52%).

Construction materials

Late payments and cash flow

  • Late payments in the construction materials industry in Romania affect 59% of the total value of B2B invoices (up from last year’s 29%). As a consequence of the pandemic-triggered economic crisis, 44% of respondents reported having to wait longer to turn overdue invoices into cash, on average up to 30 days past the invoice due date.
  • Average DSO increases of up to 10% were reported by 41% of respondents in the construction materials sector. Increases of DSO above 10% were reported by 28% of businesses. Currently DSO in the industry stands at a 90-day average (well above the 60-day average for the industry in Eastern Europe).
  • 75% of the survey respondents in Romania told us the pandemic-induced economic crisis had a negative impact on their revenue (regional average: 61%). 71% of respondents reported a negative impact on profitability (compared to 50% in the industry at regional level). 52% reported a negative impact on the costs of borrowing, (regional average: 50%).
  • To contain the costs incurred by late payments, respondents from the Romanian construction materials industry most often delayed payments to suppliers and increased the amount they spent on time, costs and resources to chase unpaid invoices (44% of respondents, compared with 31% at the regional level).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Romanian construction materials industry changed the way they approached credit checks. In addition to both financial statements and trade references, they began to make wider use of information provided directly by the customer.
  • Once credit information is collected, most attention is paid to the customer’s payment history and profitability. Industry respondents told us they plan to maintain this approach over the next six months.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Romanian construction materials industry intensified their efforts to reduce the impact of payment default on the business. The steps they took included: adjusting payment terms, increasing the use of outstanding payment reminders, factoring and self-insurance. Businesses told us they plan to continue this approach for the next six months.
  • Businesses in the industry expect their B2B customers’ creditworthiness and payment habits to improve (60%), significantly more than expect deterioration (10%) over the next six months. Their opinion is in line with that of their peers at the regional level.
  • The majority of industry survey respondents consider the collection of outstanding invoices, along with the continuation of the pandemic economic crisis, to represent the greatest challenges to business profitability in 2021. This opinion is shared by the industry in the region overall.

2021 industry outlook

  • In Romania, more respondents in the industry (53%, vs. 43% in the region) expect the domestic economy to improve over the next six months than those expecting it to deteriorate (43%, vs. 31% in the region). The same goes for their views on the future of the global economy (56% optimistic, 39% pessimistic) and their outlook on international trade (59% optimistic, 21% pessimistic).

Steel-metals

47%

of the total value of the B2B invoices issued by businesses we polled in Romania was reported to be overdue (up from 27% last year).

Atradius Payment Practices Barometer – June 2020

Steel-metals

Late payments and cash flow

  • Late payments in the metals industry in Romania doubled during the pandemic compared to before the pandemic, affecting now 20% of the total value of B2B invoices. As a consequence of the pandemic-triggered economic crisis, 48% of respondents reported having to wait longer to turn overdue invoices into cash, on average up to 10 days past the invoice due date.
  • Average DSO increases of up to 10% were reported by 52% of respondents in the construction materials sector. Increases of DSO above 10% were reported by 41% of businesses. Currently DSO in the industry in Romania stands at a 80-day average (well above the 62-day average for the industry in Eastern Europe).
  • 82% of the survey respondents in the industry in Romania reported a negative impact on the profitability (regional average in the industry: 64%). 78% of respondents reported a negative impact on sales volume (compared to 69% in the industry at regional level), and 41% told us the pandemic-induced economic crisis had a negative impact on revenue (regional average in the industry: 68%).
  • To contain the costs incurred by late payments from B2B customers, respondents from the Romanian metals industry most often delayed payments to suppliers (85% of respondents, compared to 42% in the industry at regional level) while 45% of respondents increased the amount they spent on time, costs and resources to chase unpaid invoices (compared with 34% at the regional level).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Romanian metals industry changed the way they approached credit checks. In addition to financial statements, as well as bank and trade references, they began to make wider use of information provided directly by the customer. This approach will be followed over the coming months as well.
  • Once credit information is collected, businesses polled in the Romanian metals industry said that they pay most attention to the customer’s capacity of generating cash and profitability. Industry respondents told us they plan to maintain this approach over the next six months, complementing it with a stronger focus on the assessment of the customer’s financial flexibility.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Romanian metals industry intensified their efforts to minimize the impact of the risk payment default on the business. The steps they took included: requesting guarantees of payment from their B2B customers, offering discounts for payment of invoices earlier than due, sending past due invoice over to collection significantly earlier than usually done before the pandemic. Businesses told us they plan to continue this approach for the next six months. However, the tendency is to resorting more often to self-insurance to protect the business from customer payment default.
  • Businesses in the Romanian metals industry expect their B2B customers’ creditworthiness and payment habits to improve (56%) more than expect deterioration (45%) over the coming months. However, compared to their peers in the industry at regional level, respondents in Romanian industry appear to be more pessimistic.
  • The majority of industry survey respondents in the Romanian metals industry consider a fall in demand for their products and services as the greatest challenges to business profitability in 2021 (expressed by 52% of respondents, above the 47% in the industry at regional level). Collection of outstanding invoices worries 56% of respondents in the industry in Romania, compared to 41% at regional level.

2021 industry outlook

  • In Romania, significantly more respondents in the industry (71%, well above the 40% in the region) expect the domestic economy to deteriorate over the coming months than those expecting it to improve (22%, markedly below the 45% in the region). The same goes for their views on the future of the global economy (30% optimistic, 71% pessimistic) and their outlook for international trade (26% optimistic, 71% pessimistic).

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