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 industry increased by 110% due to the pandemic-induced economic crisis (42% of the total value of B2B invoices in the industry is overdue, significantly up from last year’s 20%).
  • Average DSO increases of 10% or more were reported by 85% of respondents. Currently DSO in the industry stands at a 37-day average.
  • 61% of the survey respondents told us the pandemic-induced economic crisis had impacted their revenue. 50% of businesses in the agri-food industry reported an impact on cash flow.
  • To contain costs due to the upsurge in late payments, businesses in the industry needed to delay payments to their own suppliers, increase time and resources to chase unpaid invoices and reduce the workforce.

Approach to credit quality assessments

  • After the onset of the pandemic recession, agri-food businesses 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 both the financial flexibility and the profitability of the customer to assess creditworthiness. The survey respondents said these would remain areas of focus for the next six months.

Approach to credit management

  • Following the onset of the COVID-19 pandemic-led economic crisis, businesses in Slovakia’s agri-food industry worked harder to protect cash flow. They requested payment on cash and used outstanding invoice reminders most often, but also started to use factoring services more, as well as resorting to self-insurance. Businesses in the industry told us that over the next six months they plan to make wider use of payment guarantees.
  • More respondents expect their B2B customers’ creditworthiness to improve (55%) than those expecting deterioration (12%).
  • Fall in demand (expressed by 41% of respondents), the containment of costs and the cost of collecting outstanding invoices (both at 35%) are considered the greatest challenges to profitability in 2021.

2021 industry outlook

  • More respondents (55%) expect the domestic economy to improve over the next six months than those expecting it to get worse (37%). The same goes for international trade (45% optimistic, 36% pessimistic). We could not identify a clear-cut opinion about the future of the global economy (41% optimistic, 40% pessimistic).

Chemicals

Late payments and cash flow

  • Late payments in the industry increased by 95% due to the pandemic-induced economic crisis (39% of the total value of B2B invoices in the industry is overdue, significantly up from last year’s 20%).
  • Average DSO increases of 10% or more were reported by 95% of respondents. Currently DSO in the industry stands at a 92-day average.
  • The pandemic-induced economic crisis has hit revenue and cash flow in the industry (70% and 68% respectively).
  • To contain costs due to the upsurge in late payments, businesses in the industry most commonly responded by reducing the workforce and introducing freezes on hiring.

Approach to credit quality assessments

  • Businesses in the chemicals sector most often assess their customers’ creditworthiness through financial statements (34%) and bank references (32%). During the economic crisis, information provided directly by the customer jumped to first place in the list of common sources, complementing the above-mentioned sources.
  • Once credit information is collected, priority is given to the financial flexibility and the generation of cash of the customer to assess its creditworthiness. The survey respondents said these would remain areas of focus for the next six months.

Approach to credit management

  • During the economic crisis, respondents in the industry used trade credit insurance more frequently, and started resorting to self-insurance. Outstanding invoice remainders, adjustment of credit terms and overdue invoices sent swiftly to collections are the most often used credit management tools in the industry. Businesses told us they would continue to use these over the next six months.
  • 48% of businesses do not expect to see a change in their B2B customers’ creditworthiness. 39% expect improvement and 14% deterioration.
  • Businesses consider the greatest challenges to profitability in 2021 to include the containment of costs (46% of respondents), and the continuation of the economic crisis due to the pandemic (46%).

2021 industry outlook

  • More respondents (48%) expect the domestic economy to deteriorate over the next six months than those expecting an improvement (41%). The same goes for international trade (28% optimistic, 51% pessimistic) and for the global economy (35% optimistic, 57% pessimistic).

Steel-metals

Late payments and cash flow

  • Late payments in the industry increased by 55% due to the pandemic-induced economic crisis (51% of the total value of B2B invoices in the industry is overdue, significantly up from last year’s 33%).
  • Average DSO increases of 10% or more were reported by all of respondents. Currently DSO in the industry stands at a 32-day average.
  • The pandemic-induced economic crisis has hit revenue and cash flow (both reported by 67% of respondents), as well as sales volume (65%) of businesses in the industry.
  • To contain costs due to the upsurge in late payments, businesses in the industry most often delayed payments to their own suppliers (42%) and introduced with hiring freezes (40%).

Approach to credit quality assessments

  • Businesses in the steels/metals industries most often assess customers’ creditworthiness through credit bureau reports (50%) and information provided directly by the customer (40%). In a list of assessment approaches, this latter jumped first place during 8he economic crisis, complementing the above-mentioned reports.
  • Once credit information is collected, priority is given to both the financial flexibility and the debt capacity of the customer when assessing creditworthiness. The survey respondents said these would remain areas of focus for the next six months, along with assessments of the customer’s profitability.

Approach to credit management

  • During the economic crisis the credit management tools used most often by respondents included: the adjustment of credit terms, sending overdue invoices to collections more quickly and trade credit insurance. In particular, respondents started using trade credit insurance more frequently, as well as resorting to debts securitisation. Businesses told us they would also use self-insurance more often over the next six months than before the onset of the pandemic.
  • 50% of businesses expect to see an improvement in their B2B customers’ creditworthiness. 23% expect no change and 28% deterioration.
  • Businesses consider the greatest challenges to profitability in 2021 to include maintaining adequate cash flow (45% of respondents) and a fall in demand for products and services due to the pandemic (43%).

2021 industry outlook

  • More respondents (70%) expect the domestic economy to improve over the next six months than those expecting an improvement (10%). The same goes for international trade (57% optimistic, 25% pessimistic) and for the global economy (55% optimistic, 33% pessimistic).

Electronics

Late payments and cash flow

  • Late payments in the Slovakian electronics industry affect 51% of the total value of B2B invoices (significantly up from last year’s 33%). Due to the pandemic-induced economic crisis, 40% of respondents reported having to wait longer to cash in overdue invoices, on average up to 20 days past the due date.
  • Average DSO increases of up to 10% were reported by 63% of respondents. 35% of respondents reported DSO increases of more than 10%. Currently DSO in the Slovakian electronics industry stands at a 100-day average (lower than the 108-day industry average in Eastern Europe).
  • Most of the survey respondents from the industry (55%, compared to 59% at regional level) told us the pandemic-induced economic crisis has negatively impacted their revenue, while 46% of respondents (in line with the regional average for the industry) reported a negative impact on cash flow.
  • To limit cost and liquidity issues caused by late payments, businesses from Slovakia’s electronics industry reporting cutting jobs (39%) and delaying payments to suppliers (35%).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Slovakian electronics industry did not change the way they approached credit checks and continued to rely on information available from financial statements and trade references (reported by 40% of respondents in each case).
  • Once credit information is collected, businesses from the Slovakian electronics industry told us that they focus on the customer’s payment history, profitability and capacity to generate cash. Respondents told us they plan to maintain this approach over the coming months.

Approach to credit management

  • Following the onset of the pandemic-led economic crisis, survey respondents in the Slovakian electronics industry intensified their efforts to reduce the impact of payment default on the business. This included sending outstanding invoice reminders (54% of respondents) and adjusting credit terms (52%). Over the coming months, 50% of businesses polled in the industry plan to make a wider use of trade credit insurance.
  • 44% of businesses polled expect B2B customer creditworthiness to improve (slightly lower than the 49% reported by the industry at regional level). Only 19% expect deterioration over the coming months (compared to 22% in the region overall).
  • Most of the businesses polled in the Slovakian electronics industry consider containment of costs to be the greatest challenge to profitability in 2021. This was expressed by 53% of respondents, compared to 37% in the industry at regional level. The second most commonly cited challenge is a fall in demand (41% of respondents, compared to 44% in the industry at regional level).

2021 industry outlook

  • In the Slovakian electronics industry, significantly more respondents expect the domestic economy to improve over the coming months (49%, compared to 63% in the industry at regional level) than those expecting it to get worse (38%, regional average: 27%). Similar opinions were expressed about the future of the global economy (47% optimistic, 38% pessimistic) and of international trade (48% optimistic, 28% pessimistic).

Business services

Late payments and cash flow

  • Late payments in the Slovakian business services sector affect 52% of the total value of B2B invoices in the industry (significantly up from last year’s 27%). 33% of respondents reported having to wait longer to cash in overdue invoices, up to 20 days on average.
  • Average DSO increases of up to 10% were reported by 72% of respondents. 15% of respondents reported DSO increases of more than 10%. Currently DSO in the Slovakian business services sector stands at a 101-day average (longer than the 97-day industry average in Eastern Europe).
  • Most of the survey respondents from the sector (63%, in line with the regional average) told us the pandemic-induced economic crisis has negatively affected their revenue, while 69% of respondents (above the 58% regional average for the sector) reported a negative impact on cash flow.
  • To avoid liquidity shortages caused by B2B late payments, 44% of respondents from the Slovakian business services sector delayed payments to suppliers (regional average: 42%). In addition, 40% of respondents told us they had to reduce their workforce to keep costs under control (regional average: 38%).

Approach to credit quality assessments

  • Following the onset of the pandemic economic crisis, respondents from the Slovakian business services sector did not change the way they approached credit checks. They continued to rely on customer financial statements (46% of respondents), as well as bank and trade references (37% in each case).
  • Once credit information is collected, respondents in the Slovakian business services sector told us that they focus on both the customer’s profitability and financial flexibility. Respondents in the sector told us they plan to maintain this approach over the coming months.

Approach to credit management

  • Following the onset of the pandemic-led economic crisis, survey respondents in the Slovakian business services sector tried reduce the risk of payment defaults on their business by sending outstanding invoice reminders. This was reported by 68% of respondents, in line with the industry average for the region. Over the coming months, businesses told us they plan to use invoice reminders more often.
  • 39% of respondents in the Slovakian business service sector expect their B2B customers’ creditworthiness to deteriorate over the coming months (regional average: 36%). In contrast just 28% expect to see improvement, compared to 30% in the region overall.
  • Businesses polled in the Slovakian business services sector consider 2021’s greatest challenge to profitability to be the continuation of the economic crisis. This was expressed by 44% of respondents, compared to 47% in the sector at regional level. 41% of businesses polled consider containment of costs to be the greatest challenge to profitability next year. (regional average: 32%).

2021 industry outlook

  • Significantly more respondents (54%, compared to 49% in the sector at regional level) expect the domestic economy to deteriorate over the coming months than those expecting it to get better (29%, compared to 31% in the region). The same goes for the future of the global economy (29% optimistic, 58% pessimistic) and of international trade (36% optimistic, 47% pessimistic).

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