Payment practices report
November 2020: risk of payment default in domestic business still hugely underestimated
Survey results for Germany
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 Germany.
Dr. Thomas Langen,
Senior Regional Director Germany, Central and Eastern Europe of Atradius, commented on the report
The risk of bad debts has risen sharply for almost all German companies as a result of the Corona crisis. This year, we were therefore particularly curious about the results of our payment behaviour barometer and how the companies surveyed would react to the increasing financial uncertainties.
The biggest surprise for us was certainly the fact that a considerable number of German companies still underestimate the risk of payment default in domestic business. Nearly half of the companies surveyed intend to grant more frequent business with payment terms in the coming months. More than 70% do not want to have such trade credits covered by insurance.
Such blank credits pose a major threat to the liquidity of one's own company - especially now that insolvent companies in Germany have had to file for insolvency again since October 1. This is because if the customer has to go to the local court, the supplier will be left without insurance cover at his own expense - and under certain circumstances will find himself in subsequent insolvency. Against this background it is all the more important that companies only take responsible risks. This is where our expertise comes in.
Businesses offer more trade credit than before the pandemic 41% of businesses reported that they most often accepted requests for trade credit from SME B2B customers in order to stay competitive on the domestic market.
Payment terms see more than four-fold increase Average payment terms in Germany have grown from 22 days prior to the pandemic to 92 days during the pandemic and are significantly longer than the average for Western Europe.
Late payments rise in Germany by 65% year-on-year On average, 40% of respondents in the country reported they had to wait up to 30 days longer than last year to turn overdue invoices into cash.
Businesses succeed in protecting cash flows from negative effect of recession In contrast to the trend seen in Western Europe, the majority of survey respondents said they had successfully contained any negative impact on cash flow.
Businesses in Germany more optimistic about the domestic economy than counterparts in region 70% of businesses in Germany told us they expect the domestic economy to improve next year. This is much more positive than the Western European average of average 57%.
Businesses leverage credit on the domestic market to promote trade amid economic uncertainty
The pandemic downturn that has spread rapidly throughout the world has reached Germany at a relatively good point in its economic cycle. The country has enjoyed ten years of solid economic performance, albeit with a slowing of economic expansion last year. This summer, as lockdown orders took effect pausing production or sales for many companies in Germany, the business community acted fast. This has enabled them to maintain their turnover on a certain level. In some cases even growing sales were possible through attractive credit terms.
It was at this point that we conducted this year’s Payments Practices Barometer survey. In addition to providing us with direct access to business opinion at a critical time, it provides us the opportunity to compare COVID-19 impacted business results with pre-pandemic times. Although this year’s survey panel is slightly different to last year, overall the survey results enable us to identify clear trends.
The strongest pattern we can see from the pandemic results is a clear shift in favour of offering credit terms in domestic business. This is a trend that looks set to continue into 2021, supported by business confidence that customer creditworthiness will improve next year.
Indeed, despite the challenge that the pandemic undeniably poses, the business community is upbeat in its forecasts and a strong sense of optimism prevails.