Overview of payment practices

By industry

Agri-food

2 in 5 invoices in the US agri-food industry are overdue

Survey respondents from the US agri-food industry reported that, on average, 40% of the total value of their B2B invoices was overdue. 17% extend past 90 days overdue and 5% were written off as uncollectable.

For 51% of respondents, B2B customers delay payments due to disputes over invoices. The average DSO (days sales outstanding) in the US agri-food industry averages 37 days (compared to a 38-day average for the country).

Most US agri-food businesses opt to absorb the costs of customer payment defaults

A majority of respondents from the US agri-food industry (72%) reported that they most often retain and manage customer credit risk through self-insurance (covering the cost of late and unpaid invoices in house), 68% request B2B credit payment guarantees, while 62% outsource debt collection.

To protect their cash flow and business profitability, a sizeable proportion of respondents from the US agri-food sector (45%) reported that they either needed to delay payments to their own suppliers to avoid cash flow issues or needed to invest additional time, resources and costs to chase overdue invoices (40% of respondents).

40%

of respondents in the US agri-food industry expect customer credit risks to worsen over the coming months

Atradius Payment Practices Barometer – June 2020

US agri-food industry braces for an increase in customer debt

In the US agri-food industry, significantly more respondents (40%) expect the risks associated with customer credit to increase, than expect a reduction of risk (11%) over the coming months. Most of the respondents from the industry predict a rise in credit risk will have a negative impact on their DSO, resulting in a reduction in cash flow and in the investment capacity of the business. To strengthen credit controls over the coming months, respondents from the US agri-food industry plan to either more frequently ask for guarantees of payment from their customers, offer discounts for early settlement of invoices, or apply credit management techniques aimed at avoiding concentrations of trade credit risk. (30% of respondents for each).

A sizeable percentage of respondents (51%) are of the opinion that dependence on bank finance will increase over the coming months due to the increased indebtedness of the agri-food industry. However, most respondents from the industry (47%) expect that banks will provide more credit to businesses over the same period. 64% of respondents are of the opinion that the industry business performance (sales and profits) will improve over the next 12 months.

Uncollectable B2B receivables in the US

(% of total value of B2B receivables)

Sample: companies interviewed (active in domestic and foreign markets) Source: Atradius Payment Practices Barometer – June 2020

Chemicals

More than half of chemicals businesses use payment delays as short-term finance

According to 54% of survey respondents, B2B customers in the US chemicals industry delay payments as they use outstanding invoices as a form of financing. DSO in the US chemicals industry averages 50 days (compared to a 38-day average for the US).

Respondents from the chemicals industry reported that, on average, 37% of the total value of B2B invoices was overdue. 9% remain overdue more than 90 days, and 3% are written off as uncollectable.

Most US chemicals businesses manage customer credit risk in house

A sizeable majority of respondents from the US chemicals industry (76%) said that they self-insure customer credit risk. This includes absorbing the costs associated with late and written-off invoices. 56% request payment guarantees such as letters of credit from their B2B customers to whom they sell goods and services with deferred payment.

To minimise the risk of payment default and protect business profitability, a sizeable proportion of respondents from the US chemicals sector (34%) reported that chasing overdue invoices costs them additional time, resources and money.

Debt levels in US chemicals industry appear to be rising

Nearly half of respondents in the US chemicals industry (49%) believe that industry debt will increase along with dependence on bank finance over the coming months. However, most respondents from the industry (48%) expect that banks will provide more credit to businesses over the same period. Significantly more respondents (42%) expect customer credit risk to deteriorate, than expect a reduction of risk (18%) over the coming months.

Most of the respondents from the industry expect this to have a negative impact on their DSO, resulting in a worsening of their liquidity position and of the investment capacity of the business. To strengthen credit management over the coming months, respondents from the US chemicals industry plan to either more frequently offer discounts for early settlement of invoices, or chase unpaid invoices by sending outstanding invoices reminders (28% of respondents for each). More than three in five respondents are of the opinion that business performance in the industry (sales and profits) will improve over the next 12 months.

56%

of respondents in the US chemical sector request payment guarantees such as letters of credit from B2B customers to whom they sell on credit

Atradius Payment Practices Barometer – June 2020

ICT / electronics

One fifth of all invoices in the ICT/electronics industry are more than 90 days overdue

Respondents from the US ICT/electronics industry reported that, on average, 47% of the total value of B2B invoices extended past their due dates. 21% are more than 90 days overdue and 4% are written off as uncollectable.

According to 46% of survey respondents, B2B customers delay payments as they use outstanding invoices as a form of financing. DSO in the US ICT/electronics industry averages 39 days (compared to a 38-day average for the US).

Credit insurance favoured by significant percentage of businesses

To safeguard cash flow and business profitability, the majority of respondents (82%) reported that they most frequently self-insure customer credit risk, while three in four respondents reported to have outsourced credit management to a credit insurer.

Due to late payments from their B2B customers, 36% of respondents from the US ICT/electronics industry reported that they either needed to delay payments to their own suppliers to avoid cash flow issues, or they needed to increase the amount of time and resources they spent to chase overdue invoices.

ICT/electronics industry buoyed by strong business confidence despite growth in customer credit risk

In the US ICT/electronics industry, significantly more respondents (38%) expect customer credit risk to deteriorate than expect a reduction of risk (13%) over the coming months. Most of the respondents from the industry expect this to cause an upswing in long overdue payments, with a negative impact on their DSO. To strengthen credit control over the coming months, respondents plan to either reduce concentrations of customer credit risk in their sales ledger, or request guarantees of payment from the B2B customers to whom they sell on credit terms.

Most respondents (77%) believe that dependence on bank finance of the ICT/electronics industry in the US will increase over the coming months due to a growing indebtedness of the industry. However, a sizeable proportion of respondents (68%) expect that banks will provide more credit to businesses over the same period. Just over nine in ten respondents are of the opinion that business performance of the industry (sales and profits) will improve over the next 12 months.

Steel / metals

A significant percentage of B2B invoices in US steel/metals sector are overdue

Survey responses in the US steel/metals industry show an average of 39% of the total value of B2B invoices were overdue, 10% are more than 90 days overdue and 2% are written off as uncollectable.

For half of those polled, B2B customers delay payments due to inefficiencies in their internal payment processes, while 40% report that late payments from B2B customers are most often due to liquidity constraints. Average DSO in the industry is 18 days (compared to a 38-day average for the US).

Letters of credit are a popular payment guarantee

Prior to selling on credit, 63% of respondents requested a letter of credit from their B2B customers. In order to protect cash flow and the profitability of the business from customer credit risk, a sizeable proportion of respondents from the US steel/metals industry (38%) reported that chasing overdue invoices costs them more time, resources and money.

Most of the respondents from the industry (68%) reported that they often needed to adjust credit terms to reflect the credit capacity of their B2B customers, and many offered discounts for early payment of invoices.

US steel/metals businesses foresee cash flow issues in the coming months

In the US steel/metals industry, more than twice as many respondents (35%) expect an increase in the default risk associated with customer credit, than expect a reduction of risk (16%) over the coming months. Most of the respondents from the industry expect this to have a negative impact on their DSO, resulting in cash flow issues. To strengthen credit control over the coming months, respondents plan to focus on credit management techniques including reducing concentrations of trade credit risk (30% of respondents), and using credit insurance (20%).

A sizeable percentage of respondents (57%) expressed concern over a predicted increase in the indebtedness of the industry over the coming months, and the consequent increase this would have on dependence on bank finance. However, 53% expect that banks will provide more credit to businesses over the same period. 70% of respondents are of the opinion that the industry’s sales and profits will improve over the next 12 months.

57%

of respondents in the US steel / metals industry expressed concern over a predicted increase in the indebtedness

Atradius Payment Practices Barometer – June 2020

Transport

More than half of the total value of invoices in the US transport industry are overdue

Respondents from the US transport industry reported that an average of 52% of the total value of B2B invoices is overdue. 18% are more than 90 days overdue, and 5% are written off as uncollectable.

According to 47% of respondents, B2B customers delay payments due to disputed invoices, while 41% of the businesses polled claim that late payments are due to B2B customers using outstanding invoices as a form of financing. DSO in the US transport industry averages 43 days (compared to a 38-day average for the US).

Most businesses manage and absorb their own credit risks

Due to late payments from their B2B customers, 25% of respondents from the US transport industry reported that they either needed to delay payments to their own suppliers to avoid cash flow issues, or had to increase the amount of time and resources spent on chasing unpaid invoices. To protect cash flow and business profitability from customer credit risk, most respondents from the industry (88%) reported that they most frequently retain and manage customer credit risk through self-insurance (absorbing the cost of late and unpaid invoices themselves).

Nearly two in four respondents stated they either request guarantees of payment from B2B customers, or they apply credit management techniques aimed at avoiding concentrations of credit risk in their sales ledger.

More than half of US transport sector respondents expect industry debt to increase

Most respondents in the US transport industry (55%) believe that their industry’s dependence on bank finance will increase over the coming months, caused by growing levels of business debt. 59% expect that banks will provide more credit to businesses over the same period. However, 72% are of the opinion that the business performance of the industry (sales and profits) will improve over the next 12 months.

Significantly more respondents (40%) expect customer credit risk to worsen than expect an improvement (13%) over the coming months. Most of the respondents from the industry expect this to cause an upswing in long overdue invoices, with a negative impact on their DSO. To strengthen credit control over the coming months, respondents plan to either reduce the concentration of customer credit risk in their sales ledger, or to offer discounts for early payment of invoices from B2B customers to whom they sell on credit terms.

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