Survey findings for Australia
Use of trade credit continues during pandemic
In the year following the start of the pandemic, trade credit was used as an important part of the supply chain of the agri-food, chemical/pharma and construction industries. Most of these essential industries reported no significant change to either the amount of their credit sales, or their payment terms. More than half of the businesses polled (55%) told us they
offered trade credit to B2B customers almost as often as they did before the pandemic. What’s more, the agri-food industry reported an increase in the use of trade credit. Over four in ten of the businesses polled (42%) reported accepting credit requests far more frequently than they did before the pandemic.
Australia: how do you expect your business performance to change over the coming months?
From which of the below do you expect the improvement in your business performance will be more likely to come?
Businesses spend more on managing trade debt
Three in five of the businesses polled (60%) incurred increased debt management administrative costs. Over four in ten (43%) reported strengthening credit control procedures, including credit quality assessments, to screen out potential defaulters prior to making credit decisions. Most of the businesses polled (on average seven in ten) gather credit information from their customers’ financial statements, use
bank references and favour customers’ internal sources. To minimise the impact of customer credit risk on the business, more than three in five of the businesses polled (66%) offer discounts as an incentive for early payment of invoices. Almost the same percentage request cash payments, spread credit risk, or ask for letters of credit. A significant proportion of the businesses surveyed actively employ trade credit insurance (75%).
of the businesses polled in Australia believe that selling on credit to B2B customers will be more common over the coming months as a short-term financing tool for customers.
Atradius Payment Practices Barometer – June 2021
DSO holds steady year-on-year
Regardless of the set of credit management tools and techniques chosen, the strong focus on trade debt management helped keep days sales outstanding (DSO) under control for most businesses (70%) who reported no year-on-year change. 25% of
businesses reported an increase in DSO, with only 3% recording a decrease. 40% of businesses told us they delayed payment to their suppliers to support their own liquidity.
Australia: top 5 greatest challenges to business profitability in 2021
Australia: on average, within what time frame do your B2B customers pay their invoices?
Average payment terms largely in line with last year
More than three in five of the businesses polled (66%) said they did not change their payment terms in the year since the pandemic began, although nearly one third extended terms by up to two weeks. SMEs told us they offered longer payment terms to grow sales, whereas larger businesses reported using terms to encourage repeat business. Many respondents extended longer credit periods to help cushion customers from financial distress during the economic squeeze and 74% told us they frequently adjusted payment terms to reflect their customers’ credit risk profile.
2021 already showing signs of an insolvency surge
Early signs of a surge in insolvency cases are evident. Businesses reported an average of 54% of B2B invoices overdue (compared to 21% in the pre-pandemic year) and 5% written off as uncollectable (compared to the 2% average of pre-pandemic year).
Significant numbers are seeking shortterm financing from external sources, with 60% resorting to factoring (largely observed in the SME segment) and 58% securitisation. 42% of the businesses polled told us they spent more on financing than in previous years.
Business concerns over the economic crisis remain
Almost one third of the businesses polled (30%) expressed concern about economic conditions over the coming months. A higher percentage of businesses expect increases in DSO (36%) and nearly a quarter (24%) anticipate issues with maintaining adequate cash flow. On a more positive note, just over half of the businesses polled (52%, particularly
among large manufacturers) expect growth to be driven by the domestic market. Looking ahead, 55% of businesses told us they plan to manage credit risk internally through techniques such discounts for early payment of invoices (44%). Conversely the same percentage of respondents told us they will invest in credit insurance over the coming months.