Main survey results for Hungary

Main survey results for Hungary

Poor payments history leads to a decline in trade credit

Trade credit is currently involved in 51% of the B2B sales of businesses surveyed in Hungary, down from last year’s 68%. An average of 40% of the businesses polled in the country reported an increase in the total value of B2B sales transacted on credit during the pandemic compared to before the pandemic (averaging 30%), while for 49% there was no change.

11% reported a decrease in B2B sales on credit (averaging 27% using trade credit following the onset of the pandemic). Trade credit was most often used in the SME segment, with businesses reporting they offered credit to SMEs to encourage sales and remain competitive on the domestic market, (36% in each case).

The main reason for turning down requests for trade credit was poorer payment behaviour by the customer (reported by 35% of respondents, in line with the average for the region).

More lenient payment terms offered during pandemic

A vast majority (63%) of the businesses surveyed in Hungary reported setting payment terms up to 30 days on average. Payment terms of up to 60 days were reported by 19% of the survey respondents, 61 to 90 days by 10% and the remaining 8% set payment terms of more than 90 days. This means the average pandemic payment terms are 40 days, an increase on last year’s 31-day average. In addition, 53% of respondents reported extending their payment terms during the pandemic, increasing them by up to up to 15 days longer on average.

They told is this was most often to provide short term finance to their B2B customers (30% of respondents), as well as to encourage sales and stay competitive on the domestic market (25% of respondents each).

Looking forward over the next six months, the businesses we surveyed in Hungary largely reported that they will continue to apply the same trade credit policies that they have applied during the pandemic. This includes offering trade credit to their B2B customers to support them financially (31% of respondents), as well as a way to stay competitive on the domestic market (29%).

Hungary sees 23% increase in overdue invoices compared to pre-pandemic levels

During the pandemic, the total value of overdue B2B invoices was 46% (regional average: 45%), up from 23% last year and representing an almost 100% year-on-year increase compared to pre-pandemic levels. In addition, half of the respondents to our survey told us they had to wait an average of 23 days to cash in overdue invoices. Only 3% of the businesses polled in Hungary reported a quicker invoice-to-cash turnaround during the pandemic, compared to before the pandemic.

Write-offs remained almost stable at 7% of the total value of B2B invoices (last year was 8%). This figure may still go up, as some long overdue invoices are still in progress and may yet be written off.

The increase in late payments caused by the pandemicled economic crisis is reflected in the lengthening of DSO. 61% of the businesses polled reported DSO increases of up to 10% compared with before the pandemic. Increases in DSO of more than 10% were seen by 33% of businesses in Hungary. DSO now stands at a 109-day average (higher than the 103-day average for the region).

Businesses surveyed in Hungary told us that the greatest potential challenge to profitability is the collection of outstanding invoices. More businesses in Hungary (46%) expressed this concern than any other country in Eastern Europe (36% in the region overall).

Atradius Payment Practices Barometer – June 2020

More businesses request data from customers for credit assessments

The majority of businesses in Hungary rely on financial statements (54%) to assess their customer’s creditworthiness, followed by bank and trade references (both at 42%). After the onset of the pandemic many businesses told us they started to place greater focus on information obtained directly from the customer. This could be because this data tends to be more up to date and possibly more reliable in such a volatile and uncertain business and insolvency environment.

Once credit information is obtained, businesses in Hungary told us they prioritise assessing the payment histories of their customers. After the onset of the economic crisis, they placed a stronger focus on the customer’s financial flexibility as well as its ability to generate cash. The survey respondents also said they plan to continue monitoring these areas for the next six months. Half of the businesses we polled in Hungary (close to the regional average of 52%) believe their customers’ creditworthiness and payment habits will improve in 2021. However, the remaining 50% believe that they will either remain unchanged, or even get worse (the latter view is held by 15% of respondents).

Payment guarantees most commonly requested in Hungary

When asked what type of credit management tools they normally use to minimise the impact of the risk of B2B customer payment default, almost all of the businesses polled in Hungary (73%) reported that they normally request guarantees of payment. Interestingly self-insurance (68%) and trade credit insurance (62%) rank second in terms of frequency of usage among businesses polled in the country.

Compared to the start of the pandemic, businesses in Hungary have increased requests for cash payment from B2B customers (40%), and resorted to self-insurance (32%). This will be the credit management tool that most of the businesses polled in Hungary (68%) will use over the next six months, in addition to requesting payment guarantees. A sizeable percentage of respondents (57%), however, reported they would consider using trade credit insurance over the same time frame.

Greatest challenge for businesses in 2021: collection of outstanding invoices

When looking forward to 2021, businesses in Hungary told us that the greatest potential challenge to profitability is the collection of outstanding invoices. More businesses in Hungary expressed this concern than any other country in Eastern Europe (46% in Hungary compared to 36% in the region).

In contrast, businesses in Hungary are the least concerned in the region about a potential fall in demand for their products and services (30% of respondents in Hungary and 41% in the region). Containing costs is a concern expressed by 30% of respondents in Hungary compared 37% in Eastern Europe. More respondents believe that the domestic economy will improve over the next six months (58%) than deteriorate (23%). The same is true for the outlook for the global economy (40% improve, 28% deteriorate) and for international trade (53% improve, 24% deteriorate).

Eastern Europe: top 4 measures to manage liquidity issues due to the impact of the pandemic

Sample: all interviewed companies Source: atradius payment practices Barometer – november 2020

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