Overview of payment practices

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

Late payments and cash flow

  • Due to the pandemic-induced economic crisis late payments in the Czech agri-food industry affect nearly 40% of the total value of B2B invoices in the industry (significantly up from last year’s 24%).
  • Average DSO increases of 10% or more were reported by 88% of respondents. Currently DSO in the industry stands at an 82-day average (below the 103-day industry average in Eastern Europe).
  • Nearly 60% of survey respondents in the industry told us the pandemic-induced economic crisis had impacted their revenue, while 55% of respondents reported an impact on cash flow.
  • To contain costs due to the upsurge in late payments, 48% of respondents from the Czech agri-food industry needed to delay payments to their own suppliers, and 36% needed to increase time and resources to chase unpaid invoices.

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Czech agri-food industry changed the way they approached credit checks and began to engage directly with their customers more often. Data, including bank and trade references, provided directly from the customer are now the most commonly used sources for creditworthiness assessments.
  • Once credit information is collected, priority is given to the evaluation of customer payment patterns to assess creditworthiness. The survey respondents from the industry said that over the next six months they would also monitor the financial flexibility and profitability of the customer.

Approach to credit management

  • Following the onset of the COVID-19 pandemic-led economic crisis, survey respondents in the Czech agri-food industry worked harder to minimise the impact of potential payment defaults on the business. They resorted to self-insurance most often, but also increased requests for payments guarantees. Over the next six months, businesses polled in the industry plan to make wider use of trade credit insurance.
  • More respondents expect their B2B customers’ creditworthiness to improve (57%) than those expecting deterioration (25%) over the next six months.
  • The greatest potential challenges to profitability in 2021 cited by respondents include: a fall in demand (expressed by 70% of respondents, significantly higher than the 49% of respondents in the industry at a regional level), maintaining adequate cash flow (43%), and the containment of costs (41%).

2021 industry outlook

  • More respondents (64%) expect the domestic economy to improve over the next six months than those expecting it to get worse (27%). We could not identify a clear-cut opinion about the future of the global economy (45% optimistic, 41% pessimistic) and international trade (39% optimistic, 36% pessimistic).

Chemicals

Late payments and cash flow

  • Due to the pandemic-induced economic crisis, late payments in the Czech chemicals industry affect 43% of the total value of B2B invoices (significantly up from last year’s 25%).
  • Average DSO increases of 10% or more were reported by 90% of respondents. Currently DSO in the industry stands at a 65-day average (below the 91-day industry average in Eastern Europe).
  • Nearly 70% of the survey respondents in the industry told us the pandemic-induced economic crisis had impacted their revenue, while 50% of respondents reported an impact on cash flow.
  • To contain costs due to the upsurge in late payments, nearly 40% of respondents from the Czech chemicals industry needed to reduce the workforce, delay payments to their own suppliers (34%), and increase the time and resources spent on chasing unpaid invoices (32%).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Czech chemicals industry changed the way they approached credit checks and began to engage directly with their customers more often. Data, including bank and trade references, provided directly from the customer are now the most commonly used sources for assessing the customer credit quality.
  • Once credit information is collected, priority is given to the evaluation of customer payment patterns and financial flexibility, when assessing creditworthiness. This approach will remain unchanged over the next six months.

Approach to credit management grow in the near term

  • Following the onset of the COVID-19 pandemic-led economic crisis, survey respondents in the Czech chemicals industry worked harder to minimise the impact of potential payment defaults on the business. The steps they took included sending outstanding invoices to collection more quickly than before the pandemic (practised most frequently), resorting to debt securitisation, and using factoring. Over the next six months, businesses polled in the industry plan to make wider use of trade credit insurance.
  • More respondents expect their B2B customers’ creditworthiness to improve (50%) than those expecting deterioration (16%) over the next six months.
  • Fall in demand (expressed by 50% of respondents, significantly higher 36% of respondents in the chemicals industry at regional level) and the collection of outstanding invoices (45%, compared to 37% at regional level), are considered the greatest challenges to profitability in 2021.

2021 industry outlook

  • Significantly more respondents (63%) expect the domestic economy to improve over the next six months than those expecting it to get worse (18%). Similar opinions were expressed about the future of the global economy (50% optimistic, 26% pessimistic) and of international trade (60% optimistic, 26% pessimistic).

Electronics

Late payments and cash flow

  • Late payments due to the pandemic-induced economic crisis in the Czech electronics industry impacted 33% of the total value of B2B invoices (significantly up from last year’s 22%).
  • Average DSO increases of 10% or more were reported by 93% of respondents. Currently DSO in the industry stands at a 110-day average (in line with 108-day industry average in Eastern Europe).
  • Most of the survey respondents from the Czech electronics industry (61% in each case) told us the pandemic-induced economic crisis has negatively impacted their revenue and sales volume, while 41% of respondents reported a negative impact on cash flow.
  • Due to late payments from their B2B customers, respondents in the industry very often took the measure of delaying payments to their own suppliers (nearly 40% of respondents), as well as reducing the workforce (34%).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Czech electronics industry did not change the way they approached credit checks and continued to rely on information available from the financial statements and past records of the customer.
  • Once credit information is collected, attention is paid to the customer’s payment patterns, profitability 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 Czech electronics industry worked harder to minimise the impact of potential payment defaults on the business. They most often requested guarantees of payment outstanding invoices, resorted to self-insurance and adjusted credit terms. Over the next six months, businesses polled in the sector plan to continue with the same approach.
  • More respondents expect their B2B customers’ creditworthiness to improve (46%) than those expecting deterioration (25%) over the next six months.
  • Fall in demand (expressed by 52% of respondents, significantly higher 44% of respondents in the chemicals industry at regional level) and the continuation of the economic crisis (52%, compared to 37% at regional level), are considered the greatest challenges to profitability in 2021.

2021 industry outlook

  • Significantly more respondents (64%) expect the domestic economy to improve over the next six months than those expecting it to get worse (30%). Similar opinions were expressed about the future of the global economy (55% optimistic, 39% pessimistic) and of international trade (41% optimistic, 36% pessimistic).

Steel-Metals

Late payments and cash flow

  • Due to the pandemic-induced economic crisis late payments in the Czech metals industry affect 36% of the total value of B2B invoices (significantly up from last year’s 27%).
  • Average DSO increases of 10% or more were reported by 77% of respondents. Currently DSO in the industry stands at a 54-day average (below the 62-day industry average in Eastern Europe).
  • Most of the survey respondents in the industry (nearly 70% in each case) told us the pandemic-induced economic crisis has impacted their revenue and sales volume, while 39% of respondents reported an impact on cash flow (significantly below the 58% of respondents from the metals industry in the region).
  • Due to late payments from their B2B customers, respondents from the Czech metals industry very often took the measure of suspending deliveries until payment of invoices (nearly 40% of respondents).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Czech metals industry reported no change in the way they approached credit checks, which are chiefly based on financial statements. However, in quite a few cases respondents told us they acquired data directly from their customers when assessing credit quality during the pandemic.
  • Once credit information is collected, priority is given to evaluating the customer’s payment patterns and profitability when assessing credit quality. Industry respondents told us they plan to maintain this approach over the next six months.

Approach to credit quality assessments

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Czech metals industry worked harder to minimise the impact of potential payment defaults on the business. They sent outstanding invoices to collection more quickly than before the pandemic (practised most frequently), used debt securitisation and resorted to factoring. Over the next six months, businesses polled in the industry plan to make wider use of trade credit insurance.
  • More respondents from the Czech metals industry expect their B2B customers’ creditworthiness to improve over the next six months (54%) than those expecting deterioration (46%). This contrasts with respondents across the region as a whole, where on average only 33% of businesses expect deterioration.
  • According to industry respondents, the greatest potential challenges to profitability in 2021 include: a fall in demand (expressed by 61%, significantly higher than the 47% of respondents a regional level), the continuation of the economic crisis (46%), and the containment of costs (46%).

2021 industry outlook

  • Significantly more respondents (54%) expect the domestic economy to deteriorate over the next six months than those expecting it to get better (46%). Industry respondents that expressed either optimistic or pessimistic views on the future of the global economy are evenly spilt (44% each) while there is a slightly higher degree of optimism about the outlook for international trade (39% optimistic, 31% pessimistic).

44%

of Czech respondents told us they increased their focus on credit information supplied by the customer to assess this latter's credit quality following the onset of the pandemic.

Atradius Payment Practices Barometer – November 2020

Services

Late payments and cash flow

  • Late payments in the Czech services sector affect 27% of the total value of B2B invoices in the industry (significantly up from last year’s 17%).
  • Average DSO increases of 10% or more were reported by 90% of respondents. Currently DSO in the industry stands at a 94-day average (below the 115-day average for the sector in Eastern Europe).
  • Most of the survey respondents in the industry (nearly 70%, compared to 63% for the sector in Eastern Europe) told us the pandemic-induced economic crisis has hit their revenue hard. 64% of businesses in the sector reported a drop in sales volume (in line with the regional average).
  • Due to late payments from their B2B customers, respondents from the Czech services sector often resorted to reducing the workforce (33% of respondents, almost in line with the regional average) and delaying payment to their own suppliers (31%).

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Czech services sector reported no change in the way they approached credit checks, which are chiefly based on data provided directly from their B2B customers as well as on information available in customer financial statements.
  • Once credit information is collected, priority is given to evaluating the customer’s past payment record. 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 Czech services sector worked harder to minimise the impact of potential payment defaults on the business. They used self-insurance more often, sent more outstanding invoice reminders and adjusted payment terms. They also reported sending invoices to collection more quickly than before the pandemic. Over the next six months, businesses in the sector do not plan to change the use of these credit management tools.
  • Although slightly more respondents from the industry expect their B2B customers’ creditworthiness to improve (38%) than those expecting deterioration (31%), it will be interesting to see how this develops over the next six months.
  • The continuation of the economic crisis (expressed by 55% of respondents, significantly higher than the 45% of respondents in the services sector at regional level) and a fall in demand (52%, well above the 36% in the region) are considered the greatest challenges to profitability in 2021.

2021 industry outlook

  • More respondents (44%) expect the domestic economy to improve over the next six months than those expecting it to get worse (38%). 45% are optimistic about the future of the global economy, while 40% are pessimistic. When considering the outlook for international trade, more respondents expressed pessimism (42%) than optimism (39%).

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