Overview of payment practices

By industry: impact of the COVID 19-induced economic crisis on industries

Agri-Food

Late payments and cash flow

  • Late payments in the agri-food industry affect nearly half of the total value of B2B invoices (significantly up from last year’s 28%). 23% of respondents reported having to wait longer to cash in overdue invoices, up to 16 days on average. For 74%, there was no change in the average invoice-to-cash turnaround, while 3% of respondents cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 76% of respondents (regional average: 57%). 17% reported increases of above 10% (regional average: 35%). Currently DSO stands at a 142-day average. This is well above the 108-day average for Western Europe.
  • 49% told us their revenue was negatively affected by the pandemic downturn. 31% reported a positive impact. This is consistent with the industry in Western Europe, (regional average: 52% negative, 23% positive). Negative impact on cash flow was reported by 27% of businesses (regional average: 37%) and positive impact by 39% (regional average: 27%).
  • To avoid liquidity shortfalls, 54% of agri-food businesses in the UK increased the amount of time and resources spent on chasing unpaid invoices (regional average: 37%). 36% pursued additional financing from external sources (regional average: 31%).

Approach to credit quality assessments

  • After the onset of the economic crisis, the agri-food industry changed the way they approached credit checks. Stronger focus was given to information provided directly from B2B customers along with trade references. These latter, together with financial statements and bank references are now the most common sources for creditworthiness assessments in the industry.
  • The sector gives priority to evaluating the customer’s past payment history and ability to generate cash. The majority told us they would continue to monitor these areas over the coming months, along with the customer’s profitability and financial flexibility, necessary to withstand unexpected shifts in the business and economic environment.

Approach to credit management

  • Businesses intensified the use of trade credit insurance and requested more payment guarantees following the onset of the economic crisis. Many also began to reduce reliance on a single buyer, and resorted to self-insurance against bad debt. Over the coming months, businesses told us they plan to make wider use of self-insurance, letters of credit and will offer discounts for early payment of invoices more often.
  • 70% of respondents expect to see improvement in customer creditworthiness, while only 14% expect deterioration. This compares to 54% expecting improvement in Western Europe and 16% expecting deterioration
  • 47% of the industry considers the greatest challenge to profitability in 2021 to be bank lending restrictions. This compares to 31% with the same concern at regional level.

2021 industry outlook

  • 59% of respondents expect the domestic economy to improve over the next six months (regional average: 57%). 21% expect it to get worse (regional average: 27%). The majority of businesses are optimistic about the outlook for the global economy (56% optimistic, 17% pessimistic) and international trade (61% optimistic, 12% pessimistic).

Construction

Late payments and cash flow

  • Late payments affect 44% of the total value of B2B invoices in the construction industry (up from last year’s 26%). 55% reported having to wait longer to turn overdue invoices into cash, up to 10 days past the due date on average. 43% reported no change in average invoice-to-cash turnaround, and the remainder cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 73% of respondents (regional average: 63%). Increases above 10% were reported by 23% of businesses (regional average: 33%). Currently DSO stands at a 47-day average (regional average: 70 days).
  • 34% revealed revenue levels were negatively affected by the pandemic downturn (regional average: 49%). 39% reported a positive impact (regional average: 25%). 41% reported a negative impact on cash flow (regional average: 34%) and 33% positive (regional average: 28%).
  • 49% of respondents laid off workforce (regional average: 34%). 41% delayed payments to suppliers (regional average: 36%).

Approach to credit quality assessments

  • After the onset of the economic crisis, the industry did not change the way they approached credit checks. Bank and trade references are now the most common sources for creditworthiness assessments in the industry.
  • The industry prioritises evaluating the customer’s past payment history and the ability to generate cash. The majority of respondents plan to continue to monitor these areas over the coming months, alongside the customer’s borrowing capacity.

Approach to credit management

  • Survey respondents told us they strengthened their credit management practices by requesting payment guarantees and offering discounts for early payment of invoices. Interestingly, the same percentage of respondents told us they either resorted to self-insurance or used credit insurance. Looking ahead, businesses told us they additionally plan to request cash payments and letters of credit.
  • 38% expects customer creditworthiness to improve over the coming months (regional average: 48%). 33% expects it to get worse (regional average: 17%).
  • 56% of the industry considers the greatest challenge to profitability in 2021 to be the effective collection of outstanding invoices (regional average: 42%.) Maintaining adequate cash flow ranks second with 49% of the responses (regional average: 47%).

2021 industry outlook

  • 52% of respondents expect the domestic economy to improve over the next six months (regional average: 57%). 26% expects it to get worse (regional average: 25%). 50% expects the global economy to improve, with 33% expecting it to decline. 51% expects international trade to grow, 28% to shrink (largely in line with their industry peers at regional level).

48%

of UK businesses increased the amount of time, costs and resources they spent on collecting outstanding invoices after the onset of the pandemic (37% of respondents at regional level).

Atradius Payment Practices Barometer – November 2020

Consumer Durables

Late payments and cash flow

  • Late payments in the consumer durables industry affect 63% of the total value of B2B invoices (compared to last year’s 25%). 44% of respondents reported having to wait longer to cash in overdue invoices, up to 25 days on average. For 52%, there was no change in the average invoice-to-cash turnaround, while the remainder cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 45% of consumer durables businesses (regional average: 51%). Increases of more than 10% were reported by 55% of businesses (regional average: 38%). Currently DSO stands at a 141-day average (significantly higher than the regional average of 61 days).
  • 44% told us their revenue was negatively affected by the pandemic (regional average: 49%). 44% reported a positive impact (regional average: 33%). 42% reported ill effects on cash flow (in line with the regional average) 42%) while 22% said they had experienced a positive impact (regional average: 32%).
  • 62% of the industry most often increased the time, costs and resources spent to chase unpaid invoices (higher than the 40% in Western Europe overall).

Approach to credit quality assessments

  • Following the onset of the economic crisis, the industry began to source credit information directly from the customer more often and now use this data alongside financial statements, bank and trade references.
  • The industry prioritises evaluating the customer’s profitability and financial flexibility. Survey respondents say this approach will remain unchanged over the coming months.

Approach to credit management

  • The industry told us their credit management practices now chiefly include self-insurance and offering discounts for early payment of invoices (reported by 73% and 66% respectively). Over the coming months, they plan to continue with this approach, in addition to requesting payment guarantees more often.
  • 60% of respondents (regional average: 50%) believe their B2B customers’ creditworthiness will improve over the coming months. 9% believe it will deteriorate (regional average: 23%).
  • 57% of the industry believes that fall in demand presents the greatest challenge to profitability in 2021 (regional average: 45%). Supply chain disruptions ranks second at 53% (regional average: 27%).

2021 industry outlook

  • 68% of respondents expect the domestic economy to improve over the next six months (regional average: 57%). 19% expects it to get worse (regional average: 25%). The majority of businesses are optimistic about the outlook for the global economy (52% optimistic, 26% pessimistic) and international trade (70% optimistic, 16% pessimistic).

ICT / Electronics

Late payments and cash flow

  • Late payments in the ICT/electronics industry affect 47% of the total value of B2B invoices (compared to last year’s 30%). 59% of businesses told us it took 16 days longer on average to cash in overdue invoices. 43% reported no change, while 38% reported no change and the remainder told us they cashed in overdue invoices earlier than a year ago.
  • Average DSO increases of 10% or more were reported by 55% of survey respondents (regional average: 51%). DSO increases of up to 10% were reported by 44% (regional average: 45%). Currently DSO stands at a 40-day average (well above the 73-day industry average in Western Europe).
  • 70% of respondents suffered revenue shortfall following the onset of the economic crisis, higher than industry level in Western Europe (57% of respondents). The percentage of UK respondents reporting a negative impact on cash flow (32%) is below the regional level (38%).
  • To avoid liquidity issues, 61% of respondents from the industry spent more on time and resources chasing unpaid invoices (regional average 57%).

Approach to credit quality assessments

  • After the onset of the economic crisis, the industry changed the way they approached credit checks, sourcing information directly from B2B customers more often than before. Customer information, bank and trade references, as well as financial statements are currently the most often used sources for creditworthiness assessments.
  • ICT/electronics businesses prioritise evaluating their customers’ ability to generate cash and borrowing capacity. They told us they plan to maintain this approach over the coming months in addition to more regularly monitoring the customers’ past payment history.

Approach to credit management

  • Typically survey respondents reported offering discounts for early payment of invoices more frequently during the pandemic compared to practices prior to the COVID-19 economic crisis. Businesses also told us that, moving forward, they plan to request payment guarantees.
  • 42% expects their customers’ creditworthiness to improve over the coming months (regional average: 47%). This is considerably more than the 38% expecting to see a deterioration (regional average: 28%).
  • 45% of businesses consider a fall in demand and 45% tensions in global trade to present the greatest challenges to profitability in 2021 (regional averages: 40% and 30% respectively). 37% of businesses are concerned about future supply chain disruptions (regional average: 39%).

2021 industry outlook

  • While the majority of respondents report a pessimistic outlook for the domestic economy over the coming months (43% expect it to get worse, 37% to improve) there are variations within subsectors. The same is true for the outlook for the global economy (39% optimistic, 52% pessimistic) and for international trade (32% optimistic, 45% pessimistic).

Business Services

Late payments and cash flow

  • Late payments in the UK services/business services sector affect 38% of the total value of B2B invoices (compared to last year’s 24%). 45% of respondents reported having to wait longer to cash in overdue invoices, up to 12 days on average. For 41%, there was no change and the remainder reported cashing in overdue invoices earlier than before the crisis.
  • Average DSO increases of up to 10% were reported by 59% of businesses (regional average: 52%). Increases of more than 10% were reported by 30% (regional average: 40%). Currently DSO stands at a 52-day average (above the 92-day average for the industry in Western Europe).
  • 46% of businesses polled (regional average: 44%) told us they experienced cash flow issues caused by the economic crisis. 31% said that cash flow remained unaffected (28% in the region), while 23% reported a positive impact (28% in the sector at regional level).
  • 41% of the sector spent more on time, costs and resources to chase unpaid invoices (regional average: 40%). 39% delayed payment to suppliers (in line with the regional average).

Approach to credit quality assessments

  • After the onset of the economic crisis, respondents told us they did not change their approach to credit assessments. Information provided directly by the customer, alongside financial statements, bank references and credit reports issued by specialist agencies are currently the most often sourced information in the industry.
  • Businesses prioritise evaluating the customer’s past payment history, profitability and ability to generate cash. Survey respondents say they will retain this focus over the coming months alongside monitoring customer financial flexibility.

Approach to credit management

  • Following the onset of the economic crisis, the sector’s primary credit management practices include: self-insurance, cash payment requests and discounts for early payment of invoices. Over the coming months, businesses told us they plan to continue with this approach, although they also plan to adjust payment terms more frequently than they did in the past.
  • 44% of industry respondents (regional average: 48%) believe their B2B customers’ creditworthiness will improve over the coming months. In contrast, 25% believe it will deteriorate (regional average: 28%).
  • 43% of the sector believes the continuation of the economic crisis presents the greatest challenge to profitability in 2021 (regional average: 43%). Maintaining adequate cash flow follows (cited by 43%, compared to 43% in the region).

2021 industry outlook

  • The sector is optimistic about the outlook for the domestic economy over the coming months (56% expect it to improve, 29% to get worse). The same goes for the outlook for the global economy (45% optimistic, 33% pessimistic) and international trade (45% optimistic, 38% pessimistic).

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