Payment practices report
November 2020: strong customer relations set business tone for 2021
Survey results for France
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 France.
Yves Pierre Poinsot,
Atradius Country Manager for France commented on the report
COVID-19 has significantly impacted french economy and there remain many questions on what will happen in 2021. The fact is we simply don’t know how long the pandemic will last.
Despite governmental measures designed to help prop up businesses, many sectors have hardly suffered from the lockdowns and forced closures with a significant increase in late payment affecting their cash flow.
Some sectors, such as machines sector, are protecting their receivables with a wider use of credit insurance. Facing the uncertainty of our environment, it is important for businesses to protect their cash flow from non-payment risks offered by credit insurance, as risks are likely to increase in 2021.
Businesses target domestic sales with proactive credit policies 72% of businesses surveyed in France reported that they most often accepted requests of trade credit to encourage sales on the domestic B2B market.
Credit terms become important source of short-term finance The primary reason for the increase in payment terms includes providing B2B customers in financial distress with short-term financing. This was reported by 30% of businesses.
Late payment surge in France 45% of respondents told us they had to wait up to one month longer than last year to turn overdue invoices into cash, notably higher than the 22-day average for Western Europe overall.
COVID-19 pandemic leads to cash flow issues Cash flow issues were reported by 44% of respondents in France, compared to 38% in Western Europe.
France leads region in sourcing credit information directly from customers 51% of respondents sourced credit information directly from the customers. This was highest across the countries surveyed in Western Europe, and well above the 38% average for the region.
Businesses use trade credit as a tool to grow sales and provide short-term finance
France has been severely affected by the COVID-19 virus and in response implemented a long and stringent lockdown. This has impacted business throughout the country and has resulted in a strong contraction of GDP. 44% of businesses reported cash flow issues, above the average of 38% for Western Europe as a whole. However, it is also fair to say that different sectors have been impacted in different ways.
The machines industry in France has been hit hard with 61% of businesses telling us they were experiencing liquidity shortages, significantly above the regional average of 42%. Late payments affect nearly half of businesses in the sector and a large proportion of the businesses we spoke admitted delaying payments to suppliers. In contrast, although 45% of businesses in the agri-food industry experienced cash flow issues, 38% reported no impact at all.
An interesting trend revealed by the survey is that after the start of the pandemic businesses in France began using trade credit as a tool to stimulate sales and provide short-term finance to customers. In addition to this being highlighted by businesses we spoke to, it can be seen in the dramatic lengthening of payment terms. However, there was also a big jump in late payments. In fact, France was second only to Greece in reporting the highest percentage of late payments in Western Europe. Despite all of this neg- ativity however, businesses also reported working more closely with customers to develop a proactive approach to credit. They reported being more open to the idea of providing customers with access to short term finance, while in return suppliers directly provided financial information more often.
Businesses plan to continue this approach into 2021 and about half report they expect to see customer creditworthiness improve next year.
This year’s Payment Practices Barometer survey was conducted after the onset of the pandemic. Benchmarking the results to compare against last year’s results provide us with a useful insight into how businesses are faring during the pandemic. Where possible the questions and interview groups are identical to last year, although there are some fluctuations.