Survey findings for the US
Key survey results the US
The full impact of the trade war uncertainties and the economic downturn caused by the COVID-19 pandemic remains uncertain. However, as the responses to the Atradius Payment Practices Barometer Survey show, there has been a significant deterioration of B2B customer credit risk in the US, with a staggering 72% year-over-year increase in invoice payment defaults. The suppliers we polled in the US reported 43% of the total value of B2B credit sales is overdue. This rise is in large part attributable to an increase in the amount of long overdue invoices (still unpaid after than 90 days past their due date), the total value of which rose to 16%, up from 10% one year ago.
What’s more, the businesses we surveyed recorded a fourfold increase in the total value of write-offs of uncollectable receivables, rising to 4% from 1% last year. The survey responses showed a business environment experiencing strained cash flow and liquidity issues. In particular, this was evidenced by the year-over-year 32% increase in businesses stating they needed to delay payment to their suppliers due to late payments from their customers and by the 41% increase in respondents who said their B2B customers use outstanding invoices as a form of short-term finance.
Not surprisingly, B2B payment terms set by the suppliers surveyed in the US are far longer than a year ago (averaging 38 days from invoicing, vs. 24 days) and longer than the 31-day average for the region. Payment terms are most often set in accordance with company standards (50% of survey respondents vs. 47% regional average) and industry standards (42% of respondents, vs. 34% for the region).
To mitigate customer credit risk in such challenging economic times, US respondents to our survey said they dedicate careful attention to credit management, often more so than their peers in the region. This can be seen in the widespread use of internal retention and management of customer credit risk (76% of respondents, vs. 66% in the region actively absorb the costs of customer payment defaults) and in the requests for guarantees of payment from B2B customers prior to a credit sale (reported by 71% of respondents, vs. 64% in the region).
Survey respondents also demonstrated a widespread recourse to a mix of credit management techniques, such as offering discounts for the early payment of invoices, avoidance of credit risk concentrations and adjustment of credit terms. Despite this attention to credit management processes, working capital among our respondent’ businesses has been tied up in overdue B2B invoices for an average of nine days longer than one year ago. Of note, businesses in the agriculture and food & beverages industries experienced the most difficulties in collecting outstanding debts.
Looking ahead, more respondents in the US (48%, up from 34% last year) anticipate a worsening of their B2B customers’ payment practices (in particular a significant lengthening of DSO – days sales outstanding), than an improvement (15%). In response, 53% of respondents plan on strengthening their internal credit control and debt collection procedures. 54% of the respondents in the US believe their industry’s indebtedness will increase, causing greater dependence on bank finance. However, respondents also believe that the willingness of banks to provide credit to the business community will increase, and the business performance of their industry, in terms of sales and profits, will improve over the coming months (73% of respondents).
With an increase in U.S. businesses expecting worsening payment practices ahead, it is more important than ever for firms to mitigate credit risk by knowing their trading customers and staying informed of their financial health.”