Payment practices report
November 2020: Late payments and cost containment are 2021 business worries
Survey results for Slovakia
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 Slovakia.
Atradius Country Manager for Slovakia commented on the report
Prior to the pandemic recession businesses throughout Slovakia favoured the use of outstanding invoice reminders. Following the economic crisis, an increasing number of businesses turned to trade credit insurance.
Most of the respondents to the Atradius Payment Practices Barometer survey in Slovakia also told us they planned to continue using trade credit insurance going forward.
Strong credit management practices are more important than ever during times of economic stress. Offering credit to customers and prospects will help attract trade, but carries the risk of non-payment.
This increase in the use of credit insurance will help support trade in Slovakia and, I hope, will help the country through an economic crisis that has rocked the economy to its core.
Slovakia tops poll for most businesses negatively impacted in Eastern Europe A higher proportion of businesses in Slovakia reported a negative impact on proﬁtability caused by the pandemic-induced economic crisis than in other country in Eastern Europe. Economic crisis causes region’s sharpest increase in late payments Late payments increased in Slovakia by an average of 113%. Following the downturn in the economy, 49% of the total value of the B2B invoices issued by businesses remained unpaid at the due date. This compares to last year’s 23%and represents an average 113% increase. Slovakia has lowest average DSO in Eastern Europe At just 73 days, Slovakia reported the lowest DSO (days sales outstanding) in Eastern Europe, well below the 103-day regional average. Strong credit management measures have also helped decrease the amount of overdue receivables written off as uncollectable (now down to 3%from 7% last year).
Signiﬁcant number of businesses lay off staff 37% of respondents to the survey in Slovakia reported reducing the workforce in a bid to reduce costs caused by the impact of late payments. This was the cost reduction measure most frequently applied by the businesses polled in the country and is signiﬁcantly greater than the 31% average for the region. Optimism about local economy greater than 2021 global outlook Most respondents (48%) felt that both the domestic economy and international trade will improve over the next six months. A similar percentage (47%) also felt the global economy would deteriorate over the same timeframe.
Slovakia: top 5 challenges to business proﬁtability in 2021
Before and after the pandemic: almost black and white contrast for Slovakia
Prior to the onset of the COVID-19 pandemic and the global recession that followed, Slovakia’s overall industry performance outlook was fair. Admittedly its heavy dependence on automotive made it vulnerable to adverse developments in that sector. But, growing employment and a rise in private consumption was supporting the economy and resulting in fairly good forecasts.
Then the virus spread through the world and the pandemic-induced economic crisis hit Slovakia hard. Out of all of the countries polled in Eastern Europe for the Atradius Payment Practices Barometer, more businesses in Slovakia reported a negative impact on proﬁtability than anywhere else in the region.
There are several potential reasons for this. The ﬁrst is that businesses in Slovakia were carrying the region’s highest levels of capital costs. Respondents to the poll told use that they had to borrow the ﬁnance to cover poor cash ﬂow.
The second reason, a severe drop in sales volume, negatively impacted proﬁtability while also compounding issues with cash ﬂow. In fact, Slovakia ranks second in the region for the percentage of respondents (59%) who said that the economic crisis negatively impacted revenue and cash ﬂow. This means that the capital costs could not be offset by revenue or cash ﬂow, resulting in a negative impact on proﬁtability.
When asked about how they viewed the future, the majority told us that they expected the global economy to deteriorate in 2021. However, a similar percentage felt optimistic about the domestic economy and viewed 2021 in a positive light.