Payment practices report
November 2020: Trade credit slashed during pandemic amid concern for falling demand
Survey results for Czech Republic
The Atradius Payment Practices Barometer is an annual survey that assesses business payment behaviour throughout the world. The survey explores a range of topics including payment terms, payment delays, credit sales and DSO (Days Sales Outstanding).
The survey provides us with the opportunity to hear directly from businesses and, this year, gives us insight into how businesses are coping with the COVID-19 pandemic and global recession. In this report, you will ﬁnd the survey results for the Czech Republic.
Atradius Country Manager for Czech Republic commented on the report
About half of the businesses polled in the Czech Republic during the pandemic crisis use trade credit insurance to protect their accounts receivable for B2B credit sales. During the heightened insolvency environment caused by the pandemic-induced sudden downturn, credit insurance is vital for business survival. This is not only because of the safety net it provides, but also the proactive approach to granting trade credit.
Businesses work closely with our underwriters to assess the creditworthiness of customers and even supply chains. Our customers are supported by enhanced market knowledge to help them trade more competitively, as well as the peace of mind that they won’t be stuck with a bad debt if a customer goes under before settling outstanding invoices.
Amount of overdue invoices surges during the pandemic Businesses in the Czech Republic experienced an average increase in the total value of overdue B2B invoices of 63% year-on-year.
SMEs with a poor credit record increasingly refused credit by suppliers 40% of requests for B2B trade credit made by SMEs were turned down by businesses in the Czech Republic due to poor creditworthiness. This is well above the regional average of 28%.
Czech Republic experiences rapid drop in credit sales Prior to the pandemic, trade credit was used in more than 80% of B2B sales in the Czech Republic. After the virus brought most of the world to a standstill, this plummeted to about 50%.
Supplier cash ﬂow hit hard in COVID-19 economic crisis As the economic situation deteriorated and many businesses experienced a squeeze on cash ﬂow, the most common response reported by businesses was the delay of payment to their suppliers.
Majority of businesses concerned about falling demand for products and services in 2021 A signiﬁcant fall in demand caused by the pandemic recession is the greatest concern for businesses in the Czech Republic. More businesses are worried about this challenge to proﬁtability in the country than anywhere else in Eastern Europe.
Businesses report negative indicators for revenue, cash ﬂow and sales volume
The Czech Republic’s export-to-GDP ratio is one of the highest in Europe. Although rising inﬂation had caused some recent interest rate increases, prior to 2020 the country had been enjoying robust growth. When the COVID-19 pandemic struck, the economy was already facing some external headwinds. This was largely caused by heavy dependence on international value chains and a vulnerability to a slow-down in the EU, its main export destination. This year’s Payment Practices Barometer survey was conducted during the COVID-19 pandemic and provides valuable insight into how businesses of all sizes and sectors throughout the Czech Republic are coping with the sudden economic downturn.
Benchmarking this year’s results against those from last year’s survey is particularly valuable and, in most instances, paints a very stark picture. Perhaps the most arresting is the before and during pandemic contrast for B2B sales made on credit: 88% dropped to 51%. Protecting businesses from the negative impact of the pandemic-led economic crisis is vital for the future prosperity of the Czech Republic. 64% of respondents to our survey reported a negative impact on revenue and 47% on cash ﬂow. Only Bulgaria and Slovakia reported a greater negative impact among the countries we polled in Eastern Europe. In addition, the Czech Republic had the second highest percentage of respondents in the region that reported a drop in sales volume.