Survey findings for Denmark
Trade credit is tool favoured by the majority of businesses in Denmark
Trade credit is currently involved in 63% of the B2B sales of the businesses surveyed in Denmark (average for Western Europe: 55%). 43% told us that the total value of their credit sales increased since the onset of the pandemic, on average by one third. For 43% there was no change. The remainder reported a decrease in the total value of B2B sales made on credit.
51% of businesses reported that they most often accepted requests for trade credit from large enterprises to encourage sales on the domestic market (regional average: 53%). 28% of respondents said they granted credit to stay competitive (regional average: 29%), while 21% did so to provide short- term finance to their customers (regional average: 19%). 55% of respondents told us most of their trade credit refusals were for SME customers located in countries that posed a high economic risk (regional average: 24%).
On average, credit refusals corresponded to nearly 20% of the total B2B sales value.
Businesses cautious about offering longer payment terms
74% of the businesses reported setting payment terms up to a maximum of 30 days on average. This is lower than last year when 85% of businesses set terms within this range. 20% set payment terms from 31 to 60 days, last year this was just 8%. 3% set terms from 61 to 90 days and the remaining 3% from 90 days and above.
45% of respondents reported granting longer payment terms following the onset of the economic crisis, on average up to 10 days longer (regional average 47%). 44% reported no change. 11% of the businesses reported granting shorter terms since the onset of the pandemic. Average payment terms now stand at 29 days, longer than last year’s 27-day average.
31% of businesses granted longer payment terms to encourage sales on the domestic market (regional average: 32%). 26% offered longer terms to provide short-term financing for customers in distress (regional average: 23%). 21% used longer terms to encourage exports (regional average: 20%).
Over the coming months, more than one third of the businesses plan to maintain the same trade credit policy as during the pandemic. For 29% this will include offering more credit (regional average: 30%) and for 15%, offering longer payment terms (regional average: 24%).
These policies are chiefly to stimulate sales on the domestic as well as on foreign markets. Denmark’s lower appetite for long credit terms could be because many businesses were able to secure finance elsewhere. 33% told us their borrowing capacity improved after the onset of the pandemic, more than the 26% that experienced difficulty accessing finance. 40% reported no change in their borrowing capacity following the onset of the pan- demic.
Looking ahead at potential threats to business profitability next year, most businesses in Denmark identified the containment of costs as a possible threat (reported by 48%, higher than 41% in Western Europe). This was followed by the effective collection of outstanding invoices (reported by 43% in Denmark and 38% across the region). A fall in demand was cited as a potential threat to profitability by 40% of respondents in Denmark, versus 36% in the region.
Atradius Payment Practices Barometer – November 2020
Late payments increase following start of pandemic
The total value of overdue invoices in Denmark increased to 44%. This is significantly higher than last year’s average of 25%, and represents a 76% increase year-on-year (although it is still a little lower than the industry average of 47%). Overdue invoices can lead to a significant increase in the financing and administrative costs associated with carrying trade debts. (44% is below the 47% average for Western Europe).
The longer receivables remain unpaid, the lower the likelihood of collecting them. 41% of respondents told us they had to wait an average of 10 days longer than last year to turn overdue invoices into cash (regional average: 39%). In practice this means businesses in Denmark now have to wait on average 20 days after the due date to cash in overdue invoices, a doubling of last year’s 10 days, although still lower than the 22-day average for Western Europe overall. 45% of respondents told us there was no change in the invoice to cash turnaround timing (regional average: 50%).
An average of 8% of the total value of receivables was written off as uncollectable after the onset of the pandemic (7% average for Western Europe). 7% of the total value of receivables was still unpaid at 90 days. On average businesses in Denmark lost on average nearly 90% of the value of their B2B receivables that were not paid within 90 days.
57% of businesses surveyed reported DSO increases of up to 10% (regional average: 57%). 32% reported increases of more than 10% compared to pre-pandemic levels (regional average: 37%). The remainder reported shorter DSO compared to before the pandemic.
Negative impact of the pandemic less severe than in Western Europe
38% of businesses in Denmark told us their business profitability has not been negatively affected by the pandemic. This is higher than the average 34% reported by Western Europe. 26% of businesses experienced cash flow difficulties (lower than the regional average: 38%). 48% reported cash flow to be unaffected (regional average: 37%). 25% reported a positive impact caused by the pandemic (this percentage is the same at the regional level). 46% of businesses experienced revenue loss (lower than the 51% regional average).
25% reported a positive impact on revenue (regional average: 22%). In addition, 30% reported a negative impact on sales volume (regional average: 45%). 40% reported no impact (regional average: 30%) and 31% said they experienced a positive impact (regional average: 24%). 26% of businesses that experienced cash flow difficulties caused by late payments told us delayed payment to sup- pliers and 26% enacting hiring freezes (compared to 34% and 26% in Western Europe respectively).
Businesses source information from customers for credit checks
We used the survey to ask what type of credit information businesses customarily used to assess customer creditworthiness. We compared this to last year’s data to assess behaviour both before and after the onset of the pandemic. Last year 33% said they normally relied on the customer’s financial statements (regional aver- age: 41%), and 33% on bank references (regional average: 39%). 31% told us they used internal information sourced directly from their customers (regional average: also 31%). Following the onset of the pandemic, most businesses told us that they maintained this approach, although 39% also sourced information directly from their customers (regional average: 38%).
In order to assess their customers’ credit quality (and how this may have changed during the economic crisis), businesses reported reviewing their customers’ ability to generate cash and past payment history. Over the coming months, they plan to monitor their customers’ financial flexibility and ability withstand unexpected shifts in the economic and business environment.
Substantial number of businesses adopts credit insurance for first time
We asked businesses whether they changed their credit management policies following the start of the pandemic. Prior to the outbreak, credit insurance was favoured by more businesses in Denmark than in Western Europe (53% versus 45%). The trend continued following the pandemic downturn, where 42% businesses approached credit insurance for the first time, substantially more than the 26% average for Western Europe. Looking ahead, 49% of businesses plan to employ trade credit insurance next year (regional average: 47%). As a standard business practice prior to the pandemic, 62% of respondents told us they used self-insurance to protect their sales ledgers against bad debt (regional average: (56%).
Following the pandemic outbreak, however, self-insurance gained the favour of 63% of businesses that told use they had approached it for the first time (regional average: 47%). Over the coming months, 64% of businesses plan to rely on self-insurance (regional average 56%).
During the pandemic, 52% of businesses requested payment guarantees (regional average: 53%). 53% of respondents reported the same for trade debt securitisation (regional average: 26%) and 25% reported resorting to factoring more frequently than before the pandemic (regional average: 37%).
Business confidence is high among businesses in Denmark
Significantly more businesses in Denmark are optimistic than pessimistic about the potential for improvement in their customers’ creditworthiness in 2021. 51% of respondents in the country expect it to improve (47% at regional level), just 11% anticipate a decline (22% at regional level). Business confidence also extends to the domestic economy where 62% expect it to improve and just 14% expects it to get worse. This compares to 57% of Western Europe that believes their domestic economies will improve and 27% that are anticipating deterioration. Although remaining confident, lower optimism was shown for the outlook for the global economy (45% optimistic and pessimistic 31%) and international trade 53% are optimistic and 21% pessimistic.
Looking ahead at potential threats to business profitability next year, most businesses identified the containment of costs as a possible threat (reported by 48%, higher than 41% in Western Europe). This was followed by the effective collection of outstanding (reported by 43% in Denmark and 38% across the region). A fall in demand was cited as a potential threat to profitability by 40% in Denmark, versus 36% in the region.