Survey findings for France
Businesses use trade credit in a bid to stimulate domestic sales
Trade credit is currently involved in 44% of the B2B sales of the businesses surveyed in France, below the 55% average for Western Europe. Of those that use trade credit, about half (51%) told us that the total value of B2B credit sales increased by one third since the onset of the pandemic, compared to before the pandemic. For 38% there was no change. A significantly lower percentage of respondents (12%) reported a decrease in the total value of B2B sales made on credit.
72% of businesses surveyed in France reported that they most often accepted requests of trade credit to encourage sales on the domestic B2B market. This is a much higher percentage than the 53% average for the region overall. When businesses turned down requests of trade credit, they most often did so due to a deterioration of the customer’s creditworthiness. This tended to focus on SMEs and was reported more often in France than in Europe overall (48% of respondents, versus 45% in the region). On average, trade credit refusals amount to one third of the total B2B sales value.
Longer B2B payment terms offered to businesses as short-term finance
56% of the businesses surveyed reported setting payment terms of no more than 30 days on average. 20% of businesses set terms from 31 to 60 days. 11% set terms from 61 to 90 days and the remaining 13% from 90 days or longer. The latter represents more than a doubling on last year, when only 5% of the survey’s respondents reported payments terms of 90 days or more.
57% of respondents reported granting longer payment terms to their B2B customers following the outbreak of the pandemic, up to 20 days longer. The average increase for Western Europe is 47%. This is a noteworthy change in payment trends, and can also be seen in the increase in average payment terms in days for the country. Last year this stood at 34 days. After the pandemic hit, this rose to 52 days. For 37% of businesses payment terms remained stable. Only 6% reported reducing payment terms, with an average of 10 days fewer than last year.
The main reasons driving the increase in longer terms include providing B2B customers in financial distress with short-term financing (reported by 30% of businesses in the country, regional average: 23%) and encouraging sales on the domestic market (27% of respondents in France and 32% in Western Europe).
Looking ahead, 30% of businesses told us that they plan to continue with the trade credit policies they developed at the start of pandemic. In effect this means that many businesses in France are the main source of short-term finance for their customers and play an important role in the economy of the country. It also demonstrates how important trade credit can be to encourage sales when demand is down.
Many businesses in France are the main source of short-term finance for their customers and play an important role in the economy of the country. It also demonstrates how important trade credit can be to encourage sales when demand is down.
Atradius Payment Practices Barometer – November 2020
Late payments increased by an average of 78% year-on-year
Late payments increased from 27% of the total value of invoices last year, to 48% this year. In addition, 48% of businesses told us this negatively impacted their costs (regional average: 47%). This corresponds with an average 78% increase year-on-year.
Of course, statistics show that the longer receivables remain unpaid, the lower the likelihood of collecting them. 45% of respondents in France 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).
An average of 8% of the total value of B2B receivables was written off as uncollectable after the onset of the pandemic (above the 7% average for Western Europe). 8% of the total value of B2B receivables was also reported to be unpaid within 90 days. This indicates that, on average, businesses in France have lost 100% of the value of their B2B receivables that were not paid within 90 days.
The increase in late payments is reflected in the lengthening of DSO. 47% of businesses reported DSO increases of up to 10% (regional average 57%). 43% reported increases of more than 10% (regional average: 37%). Only 10% of businesses reported shorter DSO (regional average: 7%). DSO varies significantly across the industries.
Increases of DSO above 10% were reported by 51% of businesses in the construction materials sector. Average DSO increases of up to 10% were reported by 40% of the businesses polled in the steel/metals industry. Significantly, increases of more than 10% were reported by 60%. Currently DSO stands at a 180-day average (above the 110-day average for the industry in Western Europe).
Cash flow issues affect businesses in France
Customer late payments increased in France following the onset of the pandemic, and caused cash flow difficulties for many businesses. This was reported by 44% of respondents in France, compared to 38% in Western Europe. 47% of businesses responded to the cash flow shortages by delaying payments to suppliers (regional average: 34%).
France was only second to Greece in the percentage of respondents reporting the withholding of supplier payments. 35% of respondents told us they spent more on time, costs and resources to chase outstanding invoices (regional average: 37%). Hiring freezes were re- ported by 30% (regional average: 26%).
Businesses change the way they approach credit checks, working more closely with customers
Following the onset of the pandemic, we asked businesses how they assessed the creditworthiness of their B2B customers and whether this had changed from last year. 46% of businesses said that last year they usually relied on their customers’ financial statements (regional average: 41%). However, following the onset of the pandemic, 51% began sourcing 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. 33% sourced agency credit reports (regional average: 23%) and 31% checked customer trade references more frequently than before the pandemic (regional average: 25%).
When assessing the customer’s credit quality (and how this may have changed during the economic crisis) businesses reported focusing on the following areas: profitability, ability to generate cash and financial flexibility. They also monitored the customer’s ability to access cash and told us that they plan to focus on this area over the coming months.
We asked businesses whether they applied a different credit management policy than before the pandemic. 50% of respondents told us that since the onset of the pandemic they began to retain and manage the risk of customer payment default internally through self-insurance more often (regional average: 47%). 49% started to send outstanding invoice reminders more frequently (regional average: 38%). Over the coming months, however, self-insurance appears to be the credit management technique favoured by most of the respondents (58% in France and 56% in Western Europe overall). In addition, respondents told us they plan to request more payment guarantees and payments in cash (57% in France and 50% in the region).
51% of the survey respondents told us they expected their customers’ creditworthiness to improve in 2021 (slightly more than the average for Western Europe). 21% anticipate deterioration in their creditworthiness. The remaining 27% expect no change (close to the 29% average for the region).
Likewise, a majority of respondents believe the domestic economy will improve next year (as expressed by 58% in France and 57% in Western Europe). 26% expects it to get worse (regional average: 27%). The same goes for the outlook for the recovery of the global economy (48% expect growth and 33% expect a decline) and of international trade (45% growth and 36% deterioration). Despite these expressions of business confidence, however, 46% of businesses told us that managing adequate cash flow represented the greatest threat to business profitability next year.
This was followed by 44% who are concerned about the effective collection of outstanding invoices and 42% for whom containment of costs represents a threat to profitability. Businesses in France are more worried than their peers in Western Europe overall about debt collection and cash flow.