Overview of payment practices

Impact of the COVID 19-induced economic crisis on industries

Agri-food

Late payments and cash flow

  • Due to the pandemic-induced economic crisis, 40% of respondents in the industry reported having to wait longer to cash in overdue invoices, up to 30 days longer than the due date on average. Late payments in the Turkish agri-food industry affect nearly 60% of the total value of B2B invoices (double compared to last year’s 30%).
  • Average DSO increases of 10% or more were reported by 77% of respondents. Currently DSO in the industry stands at a 142-day average (well above the 103-day average for the industry in Eastern Europe).
  • 43% of the survey respondents in the Turkish agri-food industry told us the pandemic-induced economic crisis has negatively impacted their revenue, while 40% of respondents reported negative impact on cash flow.
  • To protect the business from liquidity shortages due to late payments, most of the respondents in the industry (57%) needed to delay payments to their own suppliers, and 40% needed to increase the amount of time and resources spent on chasing unpaid invoices.

Approach to credit quality assessments

  • The onset of the pandemic-led economic crisis has not changed the way businesses in the Turkish agri-food industry approached the assessment of their customers’ credit quality. This is chiefly based on the credit information obtained directly from their customers, along with information coming from the customer’s financial statements.
  • Once credit information is collected, to assess the customer’s creditworthiness priority is given to evaluating its past payment pattern, debt capacity and capability of generating cash. Over the next six months, businesses surveyed in the Turkish agri-food industry plan to have a stronger focus on these areas.

Approach to credit management

  • Following the onset of the COVID-19 pandemic-led economic crisis, survey respondents in the Turkish agri-food industry increased their efforts to reduce the impact of potential payment defaults on the business. Businesses in the industry reported using a diverse range of credit management tools. These include: attempting to collect on outstanding invoices more quickly than before the pandemic (through the use of outstanding invoice reminders and beginning collection activities at an earlier date), and requesting letters of credit from B2B customers. Over the next six months, respondents in the industry plan to make wider use of trade credit insurance and guarantees of payment.
  • Over the next six months, more respondents in the industry expect their B2B customers’ creditworthiness to improve (69%) than those expecting deterioration (14%).
  • Businesses in Turkey’s agri-food sector consider the following issues to be the greatest challenges to profitability over the next six months: maintaining adequate cash flow (expressed by 57% of respondents, significantly higher than the 45% of respondents in the industry at regional level), a fall in demand (47%, in line with regional figures) and a continuation of the economic crisis (43% of respondents, higher than the 33% in the industry at regional level).

2021 industry outlook

  • Significantly more respondents in the industry (73%) expect the domestic economy to improve over the next six months than those expecting it to get worse (23%). Businesses in the agri-food sector expressed strong optimism about the outlook for the global economy (60% optimistic, 20% pessimistic) and international trade (63% optimistic, 27% pessimistic).

Chemicals

Late payments and cash flow

  • Late payments in the Turkish chemicals industry affect nearly 53% of the total value of B2B invoices (up from last year’s 32%). Due to the pandemic-triggered economic crisis, 54% of respondents reported having to wait longer to cash in overdue invoices, on average up to 33 days longer than the due date.
  • Respondents in the industry reported average DSO increases up to 10% (43% of respondents) or more (53%). Currently DSO in the Turkish chemicals industry stands at a 123-day average (well above the 91-day average for the industry in Eastern Europe).
  • 52% of the survey respondents in the industry (in line with the industry average at regional level) told us the pandemic-induced economic crisis had a negative impact on their revenue, while 42% of respondents reported negative impact on cash flow (in line with the industry average at regional level).
  • To protect the business from liquidity issues due to late payments from customers, respondents from the Turkish chemicals industry most often needed to delay payments to their own suppliers (52% of respondents). Laying off workforce and hiring freezes were undertaken by 40% of respondents in each case (compared to 32% and 37% of respondents in the region respectively).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Turkish chemicals industry changed the way they approached credit checks and began to place a stronger emphasis on information provided directly from the customer, adding to the information available in the customer’s financial statements and in bank references.
  • Once credit information is collected, priority is given to the evaluation of a customer’s payment history, debt capacity and capability of generating cash. Businesses in the chemicals industry told us their approach would remain unchanged over the next six months. This suggests businesses in the industry are monitoring their customers’ 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 Turkish chemicals industry increased their efforts to reduce the impact of potential payment defaults on the business. The steps they took included: offering customer discounts for early payment of invoices, asking for payment guarantees and outsourcing debt collection more often than before the pandemic. Each of these processes was reported, on average, by 45% of respondents in the industry and often used alongside self-insurance, which is widely used in the industry.
  • Over the next six months, significantly more respondents in the industry expect their B2B customers’ creditworthiness to improve (68%) than those expecting deterioration (6%).
  • For most of the survey respondents from the Turkish chemicals industry, maintaining adequate cash flow presents the greatest challenge to profitability in 2021 (52% of respondents, compared to 36% in Eastern Europe). Collecting on outstanding invoices is also regarded as a challenge by 46% of respondents, compared to 37% at regional level.

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% of sector respondents expressing optimism and 23% being more pessimistic); and for international trade (69% optimistic, 20% pessimistic).

Consumer durables

Late payments and cash flow

  • Late payments in the Turkish consumer durables industry affect 54% of the total value of B2B invoices (up from last year’s 26%). Due to the pandemic-triggered economic crisis, 33% of respondents reported having to wait longer to turn overdue invoices into cash, on average up to 40 days past the invoice due date.
  • Average DSO increases of up to 10% were reported by 35% of respondents. Increases of DSO above 10% were reported by 59% of businesses in the consumer durables sector. Currently DSO in the Turkish industry stands at a 184-day average (well above the 155-day average for the industry in Eastern Europe).
  • 44% of the survey respondents in Turkey (compared to 51% 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 Turkish consumer durables industry most often resorted to hiring freezes (41% of respondents, in line with the industry average at regional level).

Approach to credit quality assessments

  • Respondents in the industry changed the way they approached assessing their customers’ credit quality after the onset of the pandemic-induced economic crisis. They began to make more extensive use of information provided directly by the customer about its credit standing, adding to the insights available in both financial and bank references. The latter sources were more customarily used by businesses in the Turkish consumer durables industry prior to the onset of the pandemic.
  • Once credit information is collected, respondents in the industry assess customers’ credit quality starting from the evaluation of their payments history, capability of generating cash and profitability. 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 Turkish chemicals industry increased their efforts to reduce the impact of potential payment defaults on the business. The steps they took included: self-insurance, more frequent use of outstanding invoice reminders and outsourcing invoice collection activity to specialist agencies. Over the next six months businesses told us they plan to continue using the same credit management tools, although many also intend to avoid concentrations of default risk in their sales ledgers.
  • Respondents in the industry are overwhelmingly optimistic about their B2B customers’ creditworthiness over the next six months. 69% expect improvement, while only 9% expect deterioration.
  • For the respondents in the Turkish consumer durables industry there is no doubt that the continuation of the economic crisis triggered by the pandemic will be the greatest challenge to business profitability in 2021 (as stated by 57% of respondents, compared with 52% at regional level). Against this background, it will be challenging to maintain adequate cash flow and to minimise the negative impact of a fall in demand on revenue.

2021 industry outlook

  • Significantly more respondents in the industry (67%) expect the domestic economy to improve over the next six months than those expecting it to deteriorate (24%). The same goes for sector opinions on the future of the global economy (63% optimistic, 30% pessimistic) and of international trade (59% optimistic, 33% pessimistic).

Textiles

Late payments and cash flow

  • Late payments in the Turkish textiles industry affect nearly 66% of the total value of B2B invoices (almost double compared to last year’s 37%). Due to the economic crisis triggered by the pandemic, 45% of respondents reported having to wait longer to turn overdue invoices into cash, on average up to 28 days past the due date.
  • Average DSO increases of up to 10% were reported by 20% of respondents. Increases of DSO above 10% were reported by 56% of businesses in the textiles sector. Currently DSO in the Turkish textiles industry stands at a 184-day average (well above the 155-day average for the industry in Eastern Europe).
  • 50% of the survey respondents from the textiles sector told us that their revenue and cash flow has been hit hard due to the pandemic-induced economic crisis.
  • To avoid liquidity shortages due to late payments, 67% of the businesses polled told us they needed to delay payments to their own suppliers. 40% of the survey respondents also told us they had to lay off members of their workforce and suspend delivery until payment of invoices as cost control measures.

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Turkish textiles industry did not change the way they approached credit checks and continued to rely on bank and trade references, in addition to financial information provided directly from the customer
  • Once credit information is collected, attention is paid to the customer’s payment history and capacity to generate cash. Industry respondents told us they plan to maintain this approach over the next six months.

Approach to credit management

  • Following the onset of the pandemic-led economic crisis, survey respondents in the Turkish textiles industry intensified their efforts to minimise the impact of potential payment defaults on the business. They most commonly offered discounts for early payment of invoices. Over the next six months, businesses polled in the sector told us that they plan to send more outstanding invoice reminders and start debt collection activities earlier than in pre-pandemic times. They also plan to protect their accounts receivable by preparing for bad debts with self-insurance.
  • Over the next six months significantly more respondents in the industry expect their B2B customers’ creditworthiness to improve (70%) than those expecting deterioration (15%).
  • According to industry respondents, the greatest potential challenges to profitability in 2021 include: maintaining adequate cash flow levels (59% of respondents), fall in demand (52%) and collection of outstanding trade debt (44%).

2021 industry outlook

  • Significantly more respondents in the industry (74%) expect the domestic economy to improve over the next six months than those expecting it to get worse (22%). The same goes for expectations on the future of the global economy (63% optimistic, 33% pessimistic) and of international trade (67% optimistic, 26% pessimistic).

Transport

Late payments and cash flow

  • Late payments in the Turkish transport industry affect 46% of the total value of B2B invoices (significantly up from last year’s 27%). As a consequence of the pandemic-triggered economic crisis, 53% of respondents reported having to wait significantly longer to turn overdue invoices into cash, up to 42 days past the due date on average.
  • Average DSO increases of up to 10% were reported by 22% of respondents. Increases of DSO above 10% were reported by 59% of businesses in the transport sector. Currently DSO in the industry stands at a 172-day average (well above the 149-day average in Eastern Europe).
  • Most of the survey respondents in the transport industry (62%) reported that the pandemic-induced economic crisis has impacted their sales volume and cash flow. 59% respondents in the industry told us the pandemic had negatively impacted revenue.
  • To protect their business from liquidity issues caused by late payments, respondents from the Turkish transport industry most often had to lay off staff (66% told us this, significantly higher than the 43% of industry respondents at regional level). Businesses in this sector also reported delaying payments to their own suppliers (53% of respondents told us this).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Turkish transport industry reported no change in the way they approached credit checks and continued to rely on financial statements provided by the customer and bank references.
  • Once credit information is collected, respondents in the industry give priority to the assessment of the customer’s profitability as well as its capability to generate cash and meet its financial obligations in the short term. Survey respondents say this approach to the assessment of the customer’s credit quality 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 Turkish transport 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: requesting guarantees of payment more frequently, sending more outstanding invoice reminders and outsourcing collections activity to specialist agencies. Over the next six months significantly more respondents in the industry expect their B2B customers’ creditworthiness to improve (75%) than those expecting deterioration (6%).
  • Maintaining adequate cash flow levels (59% of respondents) and fall in demand (41% of respondents) are considered the greatest challenges to profitability in 2021 by businesses polled in the Turkish transport industry. A sizeable percentage of respondents (34%) consider the prolongation of the economic crisis due to the pandemic as the greatest challenge to profitability next year.
  • For most of the respondents in the Turkish transport industry, maintaining adequate cash flow levels and a fall in demand are the greatest challenges to profitability in 2021 (59% and 41% of respondents respectively). A sizeable percentage of respondents (34%) consider the continuation of the economic crisis to be the greatest challenge to profitability next year

2021 industry outlook

  • Significantly more respondents in the industry (69%) expect the domestic economy to improve over the next six months than those expecting it to worsen (22%). The same goes for expectations on the future of the global economy (56% optimistic, 31% pessimistic) and about the outlook for international trade (59% optimistic, 24% pessimistic).

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