Overview of payment practices

By industry

Agri-Food

Late payments and cash flow

  • Late payments in the Italian agri-food industry affect 50% of the total value of B2B invoices (significantly up from last year’s 26%). 41% of respondents reported having to wait longer to cash in overdue invoices, up to nearly one month on average. For 49%, there was no change in the average invoice-to-cash turnaround, while 10% of respondents cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 56% of respondents. 34% reported increases of above 10%. Currently DSO in the industry stands at a 105-day average. This compares to the 108-day average for the industry in Western Europe.
  • 43% told us their cash flow was negatively affected by the pandemic downturn. 39% reported no impact, while for 18% the impact was positive.(Regional averages: 37% negative impact, 36% no impact and 27% positive impact).
  • To avoid liquidity shortages, 46% of agri-food businesses in Italy delayed payments to suppliers (regional average: 45%), while 31% increased the amount of time and resources spent on chasing unpaid invoices (regional average: 37%).

Approach to credit quality assessments

  • After the onset of the economic crisis, the sector changed the way they approached credit checks. Information provided directly from B2B customers, along with financial statements and credit reports from specialist agencies, are currently the most common sources for creditworthiness assessments in the industry.
  • The industry gives priority to evaluating the customer’s financial flexibility and debt capacity. The majority told us they would continue to monitor these key financial indicators over the coming months, along with the customer’s ability to generate cash and withstand unexpected shifts in the business and economic environment.

Approach to credit management

  • Following the onset of the pandemic downturn, the Italian agri-food industry intensified the use of self-insurance and factoring. Speeding up the debt collection process, as well as avoiding credit risk concentration in the sales ledger was also frequently undertaken. Over the coming months, businesses plan to make wider use of self-insurance and offer discounts for early settlement of invoices, as well as outsourcing debt collection to specialist agencies.
  • 51% of respondents expect to see improvement in customer creditworthiness, while 23% expect deterioration. This compares to 54% expecting improvement in Western Europe and 16% expecting deterioration.
  • 51% of the industry considers the greatest challenge to profitability in 2021 to be collection of outstanding invoices. This compares to 45% with the same concern at regional level. Maintaining adequate cash flow ranks second with 48% of respondents in Italy and 44% at regional level.

2021 industry outlook

  • 69% of respondents expect the domestic economy to get better over the next six months (regional average: 57%). 23% expect it to deteriorate (regional average: 27%). The majority of businesses are optimistic about the outlook for the global economy (51% optimistic, 30% pessimistic) and international trade (53% optimistic, 21% pessimistic).

Chemicals

Late payments and cash flow

  • In the Italian chemicals industry, overdue payments affect 54% of the total value of B2B invoices (up from last year’s 31%). 34% of respondents reported having to wait longer to cash in overdue invoices, up to one month on average. For 56% of respondents, there was no change in average invoice-to-cash turnaround, while only 10% cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 73% of respondents. 22% reported increases of above 10%. Currently DSO in the industry stands at a 41-day average. This is well above the 83-day average seen in Western Europe.
  • 32% of the industry told us their cash flow was negatively affected by the outbreak of the pandemic (regional average: 39%). 51% reported a negative impact on revenue (regional average: 53%).
  • Overdue payments led 51% of respondents to delay payments to their suppliers (regional average: 32%). 39% enacted hiring freezes (regional average: 30%).

Approach to credit quality assessments

  • After the onset of the pandemic downturn, businesses approached credit checks in a different way from the past, placing a stronger focus on information provided directly by customers. This information, along with financial statements and bank references are currently the most common sources for creditworthiness assessments in the industry.
  • Industry respondents told us they prioritise evaluating their customers’ past payment history and debt capacity. Over the coming months, businesses also plan to monitor their customers’ financial flexibility more closely.

Approach to credit management

  • Following the onset of the economic crisis, 55% of survey respondents said they began to self-insure against bad debt, while 43% made a wider use of credit insurance. Over the coming months, 52% of respondents plan to strengthen their debt collection processes, employing in-house and outsourced processes.
  • 49% of the respondents expect customer creditworthiness to improve over the coming months (same as the regional average). 17% expects deterioration (regional average: 22%).
  • 46% of respondents in the industry believe the greatest challenge to profitability in 2021 will be the effective collection of outstanding invoices (regional average: 38%). For 44% it will be containment of costs (regional average: 39%).

2021 industry outlook

  • 49% of the Italian chemicals industry expects the domestic economy to improve over the next six months (regional average 58%). 24% expects it to deteriorate (regional average: 29%). 42% expressed optimism about the recovery of the global economy, with a minority of 32% anticipating deterioration. 44% expects an improvement in international trade (regional average: 36%), and 22% a worsening.

43%

of Italian businesses sourced credit information directly from the customers more often following the onset of the pandemic (38% of respondents in Western Europe)

Atradius Payment Practices Barometer – November 2020

Machines

Late payments and cash flow

  • Late payments affect 53% of the total value of B2B invoices in the Italian machines industry (a significant increase on last year’s 21%). 45% of survey respondents reported having to wait longer to cash in overdue invoices, up to 20 days longer on average. 50% reported no change in average invoice-to-cash turnaround, while 5% told us they converted overdue invoices into cash earlier than before the crisis.
  • Average DSO increases of up to 10% were reported by 70% of the industry. 30% reported increases of more than 10%. Currently DSO stands at a 114-day average (above the 110-day average for the industry in Western Europe).
  • 50% of businesses revealed they experienced liquidity shortfalls due to the economic crisis (regional average: 42%). 20% reported cash flow to be unaffected. This contrasts with the industry at regional level, where 27% reported the same.
  • To safeguard liquidity levels and contain costs due to the increase in late payments, 50% of businesses in the industry (compared to 32% in the region) delayed paying suppliers, while 40% laid off staff (compared to 29% in the region).

Approach to credit quality assessments

  • Following the onset of the economic crisis, the industry relied more on credit information provided directly from customers, in addition to bank references. These latter, combined with checks on financial statements and trade references at currently the most commonly used credit information sources in the industry.
  • When assessing creditworthiness, priority is given to the evaluation of the customer’s past payment history and ability to generate cash. Businesses polled in the industry told us that this approach will remain unchanged over the coming months.

Approach to credit management

  • Following the onset of the economic crisis, survey respondents told us their credit management practices will include adjustment of payment terms, reduction of reliance on a single buyer and request for payment guarantees. Over the coming months, businesses plan to continue with this approach, in addition to sending outstanding invoice reminders more often.
  • Industry respondents are optimistic about the outlook for their customers’ creditworthiness next year. 55% believe it will improve, 5% it will get worse and the remainder foresee no change. At regional level 55% believe it will improve, and 19% believe it will deteriorate and the remainder expects no changes.
  • 70% of the industry believes that the continuation of the economic crisis presents the greatest challenge to profitability in 2021. Far fewer businesses in the industry in Western Europe (33%) share this view. Furthermore, 55% of respondents believe that maintaining adequate cash flow will be the greatest challenge (regional average: 44%).

2021 industry outlook

  • The industry is largely optimistic about the domestic economy (60% expect it to improve, 25% to get worse). 50% expect the global economy to recover and 20% anticipate deterioration. 55% expect international trade to improve and 30% expect deterioration.

Steel / Metals

Late payments and cash flow

  • 62% of the total value of B2B invoices issued by businesses in the Italian steel/metals industry were overdue (higher than last year’s 31%). 23% of respondents reported having to wait longer to cash in overdue invoices, up to one month on average. For 73%, there was no change in average invoice-to-cash turnaround. Only 3% reported having cashed in overdue invoices earlier than before the pandemic.
  • 43% of businesses reported DSO increases of up to 10%, while 57% reported increases of more than 10%. DSO in the industry in Italy currently stands at a 95-day average. This compares to the 110-day regional average.
  • 37% of Italian businesses told us their cash flow was negatively impacted by the pandemic. 33% reported no change, and 30% a positive impact. This compares with the following regional averages: 39% negative, 36% no impact and 25% positive.
  • To contain operating costs following the downturn, 40% of the industry laid off staff (regional average: 26%). 27% of businesses delayed payments to suppliers (consistent with the response rate for the region).

Approach to credit quality assessments

  • After the onset of the economic crisis, the industry told us they strengthened focus on credit information obtained directly from their customers. However, customer financial statements alongside bank references remain the credit information sources normally used in the industry to assess creditworthiness.
  • The industry gives priority to evaluating customers’ ability to generate cash and weather unexpected shifts in the economic and business environment. Survey respondents say that, for the coming months, they will continue with this approach.

Approach to credit management

  • Businesses told us they strengthened their credit management practices by resorting to factoring more frequently and beginning to self-insure against bad debt. Over the coming months, self-insurance will continue to be the favoured method to manage the risk of customer payment default, along with a wider use of letters of credit.
  • The industry is significantly more optimistic than their peers in Western Europe about the outlook for their B2B customers’ creditworthiness over the coming months. 57% expect it to improve (regional average: 39%) and 7% expect it to get worse (regional average: 20%).
  • Containing costs is considered the greatest challenge to profitability in 2021. This is the opinion of 67% of the country’s industry, compared to 45% in Western Europe. Effective collection of overdue invoices and potential restrictions to bank lending rank second, both at 57%, compared to 40% and 35% in the region respectively.

2021 industry outlook

  • 87% of respondents in the industry expect the domestic economy to improve over the next six months (regional average: 63%). Only 3% expect deterioration (regional average: 22%). The majority of businesses are optimistic about the outlook for the global economy (63% optimistic, 13% pessimistic) and international trade (77% optimistic, 10% pessimistic). In both cases, Italian businesses are more optimistic than their regional peers.

Textiles

Late payments and cash flow

  • Late payments in the Italian textile industry increased to 60% of the total value of B2B invoices, up from last year’s 35%. 48% of respondents reported they had to wait longer to cash in overdue invoices, up to a 20-day average. For 33%, there was no change in the average invoice-to-cash turnaround, while the reminder cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 56% of respondents. 29% reported increases of above 10%. Currently DSO stands at a 200-day average. This compares to the 98-day at regional level.
  • 35% told us their cash flow was negatively affected by the pandemic downturn. 38% reported no impact, while for 27% the impact was positive. Regional averages: 38% negative impact, 37% unaffected and 25% positive impact.
  • To avoid liquidity shortages, businesses either increased the amount of time and resources spent on chasing unpaid invoices or pursued additional financing from external sources (48% of respondents each). Regional averages: 37% and 23% respectively.

Approach to credit quality assessments

  • After the onset of the economic crisis, the industry changed the way they approached credit checks, and strengthened focus on credit information provided directly from B2B customers. This along with financial statements and bank and trade references are currently the most common sources for credit assessments in the industry.
  • The industry gives priority to evaluating customers’ profitability and ability to generate cash. The majority told us they would continue to monitor these key financial indicators over the coming months, along with the customers’ financial flexibility.

Approach to credit management

  • Following the onset of the pandemic downturn, businesses outsourced debt collection more often and resorted frequently to self-insurance to manage the risk of customer payment default. Over the coming months, industry told us they plan to reduce reliance on a single buyer and make wider use of self-insurance and guarantees of payment.
  • 46% of respondents expect to see improvement in customer creditworthiness, while 27% expect deterioration. This compares to 47% at regional level expecting improvement and 22% expecting deterioration.
  • Containment of costs (51% in the Italian industry, 41% at regional level) and potential bank lending restrictions (46% in Italy, and 30% in Western Europe overall) are considered the greatest challenge to profitability in 2021

2021 industry outlook

  • 73% of the Italian textile industry expects the domestic economy to improve over the coming months (regional average: 57%). 19% expects it to deteriorate (regional average: 27%). The majority of businesses are optimistic about the outlook for the global economy (50% optimistic, 40% pessimistic) and international trade (58% optimistic, 33% pessimistic). Italian businesses are more optimistic than their peers at regional level about the outlook for international trade.

Can we help you with information about other questions you have about managing your receivables?

Share this article