Payment practices report
November 2020: pandemic cost containment is main 2021 concern for businesses
Survey results for Romania
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).
The survey provides us with the opportunity to hear directly from businesses and, this year, gives us insight into how businesses are coping with the COVID-19 pandemic and global recession.
In this report, you will ﬁnd the survey results for Romania.
Atradius Country Manager for Romania commented on the report
The 2020 forecast downturn in Romania’s economy suddenly accelerated under the lockdown conditions imposed to tackle the COVID-19 pandemic. Like their neighbours in Eastern Europe, businesses in Romania have felt the pinch, with many inadvertently exacerbating the situation by delaying payments to protect their accounts receivable. The next six months or so will be critical for many businesses in Romania. Delaying payments is not a sustainable model. Encouragingly many businesses have expressed an interest in credit insurance.
Not only can this protect their accounts receivable but it will also help promote trade, as it will support businesses in offered trade credit. The Payment Practices Barometer survey results showed us that many businesses lengthened their payment terms in a bid to attract sales. Credit insurance will enable them to explore this policy further while protecting their ledgers from the risk of payment default.
Increasing number of requests for trade credit refused Trade credit is currently involved in 58% of the B2B sales of businesses surveyed in Romania, down from last year’s pre-pandemic levels of 78%. Domestic SMEs continue to enjoy access to trade credit The trend for reducing the amount of trade credit offered avoids the SME segment, where competition for domestic sales drives enticing credit terms. Pandemic recession causes overdue invoices to surge by 74% Overdue invoices see an average 74% increase between pre and post pandemic levels and lead to increases in days sales outstanding.
Trade credit insurance is considered by 70% of businesses as they prepare for 2021 70% of survey respondents in Romania reported considering employing trade credit insurance next year. Similar levels also told us they are looking into using securitisation, payment guarantees and overdue invoice reminders. Containing costs in 2021 is a big worry for businesses in Romania 47% of businesses in Romania are concerned about the challenge to proﬁtability that containing costs represents. This is signiﬁcantly higher than the average for the region.
Romania: top 5 challenges to business proﬁtability in 2021
Payment delays impact proﬁtability as Romania feels COVID-19 pinch
Almost without exception, businesses throughout the world have felt the impact of local and international lockdowns in response to the COVID-19 global pandemic. However some businesses and some markets have felt the negative impact on trade more keenly than others. When we polled businesses across Eastern Europe during the pandemic, more businesses in Romania described the negative impact of the pandemic-led economic crisis than the regional average. 55% of businesses in Romania told us about the negative impact on proﬁtability in comparison to the East European average of 43%. When benchmarking revenue and cash ﬂow against the survey results for the region, however, businesses in Romania appeared closer in line to the results reported by businesses in Eastern Europe. When asked what kind of measures they needed to take to protect their business from the negative impact of the pandemic-led economic crisis, businesses in Romania most frequently told us they delayed payments to suppliers.
In fact, this was reported by 52% of the businesses we spoke to in Romania and represents the highest percentage than the average for Eastern Europe, which reported an average of 43% across the region. Although nearly half of businesses in Romania feel optimistic about the domestic economic outlook next year, a similar percentage of businesses hold the opposite viewpoint. With a higher percentage expressing pessimism about international trade and the global economy, however, it seems fair to conclude that many businesses in Romania, particularly within export circles, are facing a challenging 2021. The extent of that challenge will be dictated to a large extent by how long the pandemic lasts and how quickly an effective vaccine can be developed.