Payment practices report

June 2021: businesses brace for challenges ahead

The Atradius Payment Practices Barometer is an annual review of business-to-business payment behaviour. This year’s survey explores a range of topics including payment terms, payment delays, credit sales, and DSO (Days Sales Outstanding), results of which provide a good indication of outlook for businesses in Hong Kong.

Vincent Ku,

Vincent Ku, Country Manager for Atradius in Hong Kong and Taiwan

The use of risk management protocols, such as factoring and credit insurance, will help cushion many Hong Kong businesses from the predicted H2 2021 surge in bankruptcies. Those without

cash reserves big enough to absorb large write-offs would be well-advised to explore outsourced risk management options to protect their accounts receivable moving forward.

Introduction

This year’s survey results paint a clear picture of the challenges facing Hong Kong businesses as they begin to emerge from a tough period of economic contraction.

The Atradius Payment Practices Barometer provides us with the valuable opportunity to hear directly

from businesses how they are coping with changed trading and economic circumstances caused by the pandemic. The survey questionnaire was completed by Hong Kong businesses during Q2 2021, a full year after the World Health Organisation declared Covid-19 a global pandemic.

Key takeaways from the report

Our survey in Hong Kong reveals that trading on credit with B2B customers is a very common business practice among Hong Kong respondents. Although this dipped slightly in the year following the onset of the pandemic, its widespread use signifies its importance as a tool to support sales and customer relationships.

However, in the year after the outbreak of the pandemic, a significant number of businesses saw the administration costs associated with offering trade credit increase. These need to be

carefully managed as the cost of offering credit can reach a point where it outweighs sales revenue, thus jeopardising the profitability of the business especially if profit margins are tight. Looking ahead an increased risk of insolvencies is prediceted towards the end of 2021. Businesses without cash reserves big enough to absorb large write-offs would be well-advised to use credit risk management protocols to protect their accounts receivable moving forward.

Key survey findings for Hong Kong

  • Hong Kong ranks second in Asia, after Singapore, for use of trade credit in B2B transactions
  • Payment terms offered by Hong Kong businesses are the shortest across Asia
  • Late payments affect over half of all B2B sales
  • In the year following the outbreak of the pandemic, one in two businesses in Hong Kong reported increase in credit administrative costs
  • Looking ahead, business confidence appears to be dented by uneven economic recovery

Interested in getting to know more?

For a complete overview of the payment practices in Hong Kong and in the local consumer durables,

textiles/clothing and ICT/electronics industries, please download the complete report.

If you have any questions about protecting your receivables send us a message so we can try and address your specific needs.

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