Overview of payment practices

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

Chemicals

Late payments and cash flow

  • Late payments in the German chemicals industry affect nearly 60% of the total value of B2B invoices (significantly up from last year’s 33%). Due to the economic crisis, nearly 40% of survey respondents reported having to wait longer to cash in overdue invoices, up to 20 days on average. 56% reported no change in the average invoice-to-cash turnaround, while 4% cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 44% of respondents in the German chemicals industry, while 49% reported increases of more than 10%. Currently DSO stands at a 109-day average (well above the 83-day average for the industry in Western Europe).
  • 44% of businesses in the German chemicals industry (regional average: 21%) told us that their cash flow was positively affected after the outbreak of the pandemic. 19% reported a negative impact (regional average: 39%)
  • 56% of businesses in the German chemicals industry (regional average: 39%) spent more time and resources on chasing unpaid invoices. 47% sought additional financing from external sources (regional average: 27%). 47% requested a bank overdraft extension (regional average: 21%).

Approach to credit quality assessments

  • After the onset of the economic crisis, the German chemicals industry changed the way they approached credit checks. Now data sourced directly from B2B customers, including financial statements, as well as bank and trade references are the most commonly used sources for assessments of creditworthiness.
  • Industry respondents told us they give priority to evaluating their customers’ financial flexibility and ability to obtain liquidity in order to avoid payment default. This, along with the customers’ payment histories, will be the indicators that businesses will monitor more closely over the coming months.

Approach to credit management

  • Following the onset of the economic crisis, German chemicals businesses worked to minimise the risk of payment default by sending outstanding invoice reminders more often than before the pandemic and by opting to self-insure against bad debt. Over the coming months, 70% the industry’s survey respondents told us they plan to make wider use of self-insurance than they did before the pandemic.
  • Over the coming months, 64% of the German chemicals industry expects their B2B customers’ creditworthiness to improve (significantly higher than the regional average of 49%) than the 19% expecting deterioration (regional average: 22%).
  • 51% of respondents from the German chemicals industry consider maintaining adequate cash flow to present the greatest challenge to profitability in 2021, (regional average: 41%).

2021 industry outlook

  • 76% of the German chemicals industry (regional average: 58%) expects the domestic economy to improve over the next six months. This is significantly more than the 15% expecting it to deteriorate (regional average: 29%). The majority of businesses in the industry expressed optimism about the outlook for the global economy (57% optimistic, 28% pessimistic) and international trade (53% optimistic, 29% pessimistic). In this regard, they are a lot more optimistic than their peers in Western Europe.

55%

of the total value of B2B invoices issued by businesses in the German steel/metals industry remained unpaid at the due date (higher than last year’s 35%).

Atradius Payment Practices Barometer – November 2020

Steel - metals

Late payments and cash flow

  • 55% of the total value of B2B invoices issued by businesses in the German steel/metals industry remained unpaid at the due date (higher than last year’s 35%). 25% of respondents in the industry reported having to wait longer to cash in overdue invoices, up to 23 days on average. For 75% of respondents, there was no change in average invoice-to-cash turnaround. None of the businesses surveyed in the industry reported having cashed in overdue invoices earlier than before the pandemic.
  • Compared to before the pandemic, 70% of businesses reported DSO increases of up to 10%, while 25% reported increases of more than 10%. DSO currently stands at a 193-day average. This is significantly longer than the 110-day regional average, suggesting businesses in the industry in Germany are less successful in collecting long-term outstanding invoices of high value than their peers in Western Europe.
  • 43% of survey respondents in the German steel/metals industry reported a positive impact on their revenue following the onset of pandemic-induced economic crisis. This is significantly more than those reporting negative impact (27%). This contrasts with the regional results (46% reported a negative impact and 26% positive). The same can be seen in cash flow where 43% reported a positive impact and 21% negative. (Regional average: 39% negative and 25% positive impact on cash flow).
  • 54% of the German steel/metals industry negatively impacted by post-pandemic late payments told us they needed to increase the amount of time, costs and resources they spent on chasing unpaid invoices (regional average: 36%). To avoid liquidity shortages, 50% said they needed to pursue additional financing from external sources (compared to 25% in Western Europe).

Approach to credit quality assessments

  • After the onset of the economic crisis, the German steel/metals industry told us they approached their B2B customers to obtain information for credit checks. They added this to customer financial statements, as well as bank and trade references, which remain the credit information sources that respondents in the German steel/metals industry normally use to assess their customers’ creditworthiness.
  • The German steel/metals industry gives priority to the evaluation of customers’ financial flexibility and their ability to weather unexpected shifts in the economic and business environment. Survey respondents say that, for the coming months, they will continue with this approach and combine it with an assessment of the customer’s ability to generate cash, (signalling a strong focus on liquidity levels).

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the German steel/metals industry told us they strengthened their credit management practices by sending outstanding payment reminders more frequently and adopting self-insurance practices. Over the coming months 75% told us they plan to rely on self-insurance to protect the business against bad debts.
  • The German steel/metals industry is notably more optimistic than their peers in Western Europe about the outlook for their B2B customers’ creditworthiness over the coming months. 48% expect it to improve (regional average: 39%) and 23% expect it to get worse (regional average: 20%).
  • According to 43% of the German steel/metals industry, the greatest challenges to profitability in 2021 are maintaining adequate cash flow and containing costs. (Regional averages: 34% and 45% at regional level respectively.)

2021 industry outlook

  • 68% of respondents in the German steel/metals industry expect the domestic economy to improve over the next six months, significantly more than the 16% that expect it to get worse. The majority of businesses are optimistic about the outlook for the global economy (50% optimistic, 21% pessimistic) and international trade (55% optimistic, 27% pessimistic).

Transport

Late payments and cash flow

  • Late payments in the German transport industry affect 55% of the total value of B2B invoices (compared to last year’s 35%). The pandemic recession led to 42% of respondents reporting having to wait longer to cash in overdue invoices, up to 30 days on average. For 58% of respondents, there was no change in average invoice-to-cash turnaround. None of the businesses said that they cashed in overdue invoices earlier than before the pandemic.
  • 46% of businesses surveyed reported DSO increases of up to 10%, while 42% reported increases of more than 10% compared to before the pandemic. Currently DSO in the German transport industry stands at a 200-day average (compared to the 134-day average for the industry in Western Europe).
  • 50% of respondents in the German transport industry told us the pandemic-induced economic crisis had a negative impact on their revenue (regional average 56%). 31% in Germany reported a positive. However, more respondents in Germany (42%) than in Western Europe (25%) said that they managed to contain the negative impact of the pandemic’s economic crisis on cash flow.
  • To contain liquidity shortages, 46% of businesses told us they had to increase the time, costs and resources spent on chasing unpaid invoices (regional average: 34%). 39% said they delayed payments to suppliers (regional average: 30%) and 39% sought financing from external sources (regional average: 17%).

Approach to credit quality assessments

  • In response to the pandemic recession, businesses in the German transport industry told us they paid closer attention to the evaluation of bank references and credit information provided directly by the customer than before. They continued to monitor their customers’ financial statements and payment histories.
  • Priority is given to evaluating the customer’s ability to generate cash and its financial flexibility. This approach will remain unchanged over the coming months, but will be complemented by assessments of the customer’s borrowing capacity.

Approach to credit management

  • Following the onset of the economic crisis, survey respondents in the German transport industry told us they strengthened their credit management practices by: requesting letters of credit and outsourcing debt collection. Over the coming months businesses told us they plan to make wider use of self-insurance in addition to outsourcing debt collection to specialist agencies.
  • 46% of respondents from the German transport industry expect their B2B customers’ creditworthiness to improve (regional average: 40%). 27% in Germany expect it to deteriorate over the coming months.
  • 39% of respondents in the German transport industry (regional average: 31%) believe that the continuation of the pandemic in 2021, along with its economic fallout, is the greatest challenge to profitability next year.

2021 industry outlook

  • 62% of respondents in the German transport industry (regional average: 52%) expect the German domestic economy to improve over the coming months. This is three times more than the 19% expecting it to get worse. Opinion on the outlook for the global economy is equally split (42% optimistic, 42% pessimistic). A brighter outlook for international trade is expected (53% optimistic, 31% pessimistic).

Machines

Late payments and cash flow

  • Following the onset of the economic crisis, 41% of the total value of B2B invoices in the German machines industry were outstanding at the due date (compared to last year’s 25%). 46% of respondents reported having to wait longer to turn overdue invoices into cash, up to 26 days on average. 41% reported no change, and 13% told us they cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 54% of machines businesses. Increases of more than 10% were reported by 46% of businesses. Currently DSO in the industry stands at a 48-day average (well below the 109-day average for the industry in Western Europe).
  • 77% of the German machines industry (regional average: 52% ) told us the pandemic-induced downturn had nega- tive effect on revenue, significantly more than those reporting positive impact (9%). The same goes for cash flow: 59% negative, 14% positive. At regional level, 42% of respondents reported negative, and 32% positive impact on cash flow.
  • To contain costs caused by the management of B2B late payments, 64% of respondents from the German machines industry told us they most often needed to increase the time, costs and resources spent on chasing overdue due payments (regional average: 43%).

Approach to credit quality assessments

  • After the onset of the economic crisis, the German machines industry changed the way they approached credit checks, sourcing information directly from B2B customers more often than before the pandemic. Customer information, financial statements, and credit reports from specialist credit agencies are now the most common sources for creditworthiness assessments in the industry.
  • Machines businesses in Germany give priority to evaluating customer financial flexibility, ability to generate cash and business profitability. The majority of the industry reports that they will continue to monitor these areas over the coming months.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the German machines industry told us they strengthened their credit management practices by: (63%) using factoring more frequently than before the pandemic (63% of respondents), and resorting to self-insurance against bad debt (55%). Over the coming months, respondents in the industry said they will continue using the same credit management tools, but they will also send outstanding invoices reminders more often.
  • 41% respondents in the German machines industry (lower than the region average of 55%) believe that their B2B customers’ creditworthiness will improve over the coming months. 30% believe it will deteriorate (regional average: 19%). The rest anticipate no change.
  • According to the German machines industry, the greatest challenge to profitability in 2021 would be the continuation of the economic crisis and subsequent long-term negative impact on demand. This was reported by 41% of businesses.

2021 industry outlook

  • 64% of the German machines industry is strongly optimistic about the outlook for the domestic economy over the coming months, whereas 36% expects it to get worse. The same goes for the outlook for the global economy (41% optimistic, 36% pessimistic) and for international trade (50% optimistic, 46% pessimistic).

Ict Electronics

Late payments and cash flow

  • Late payments in the Germany’s ICT/electronics industry affect just over 40% of the total value of B2B invoices (compared to last year’s 32%). 48% of businesses told us it took 15 days longer on average to cash in overdue invoices. 43% reported no change, while 9% told us they cashed in overdue invoices earlier than a year ago.
  • Average DSO increases of 10% or more were reported by 48% of survey respondents. DSO increases of up to 10% were reported by 43%. Currently DSO in the country’s industry stands at a 108-day average (well above the 73-day industry average in Western Europe).
  • 57% of survey respondents in the German ICT/electronics industry suffered revenue shortfall following the onset of the economic crisis, lower than industry level in Western Europe. The percentage of respondents reporting a negative impact on cash flow is equal to the regional level.
  • To contain costs caused by the increase in late payments, 67% of respondents from the German ICT/electronics industry spent more on time and resources chasing unpaid invoices, (regional average 57%).

Approach to credit quality assessments

  • After the onset of the economic crisis, the German ICT/electronics industry changed the way they approached credit checks, sourcing information directly from B2B customers more often than before the pandemic. Customer information, financial statements, bank and trade references are now the most commonly used sources for creditworthiness assessments in the industry.
  • ICT/electronics businesses in Germany give priority to evaluating their customers’ profitability and ability to generate cash. Industry respondents told us they plan to maintain this approach over the coming months in addition to monitoring the financial flexibility of customers.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the German ICT/electronics materials industry increased the use of outstanding payment reminders. Businesses told us that, moving forward, they plan to employ trade credit insurance as a strategic tool to protect their business from the risk of customer payment default.
  • 67% of the German ICT/electronics industry expects their B2B customers’ creditworthiness to improve (regional average: 47%) over the coming months. This is considerably more than the 19% expecting to see a deterioration (regional average: 28%).
  • 48% of businesses in the German ICT/electronics industry consider potential restrictions to bank finance presents the greatest challenge to profitability in 2021 (regional average: 30%). 43% of businesses are concerned about future containment of costs (regional average: 39%).

2021 industry outlook

  • The majority of respondents in the German ICT/electronics industry are optimistic about the outlook for the domestic economy over the coming months (67% expect it to improve, 24% to get worse). They also believe in a brighter outlook for the global economy (43% optimistic, 38% pessimistic) and for international trade (52% optimistic, 33% pessimistic).

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