Overview of payment practices

By industry: impact of the COVID 19-induced economic crisis on industries

Agri-food

Late payments and cash flow

  • Late payments in Spain’s agri-food industry affect 51% of the total value of B2B invoices (significantly up from last year’s 28%). 53% of respondents reported having to wait longer to cash in overdue invoices, up to 25 days on average. For 39%, there was no change in the average invoice-to-cash turnaround, while only 8% cashed in overdue invoices earlier than they did before the pandemic.
  • Average DSO increases of up to 10% were reported by 43% of industry (regional average: 57%). 42% reported increases of above 10% (regional average: 35%). Currently DSO stands at a 127-day average (well above the 108-day average for the industry in Western Europe).
  • 54% of businesses told us they experienced cash flow difficulties due to the economic downturn. 19% reported no impact at all (regional average negative impact: 37% and no impact 36%).
  • To safeguard liquidity levels, 49% delayed payments to suppliers (regional average: 45%) 42% enacted hiring freezes (compared to 27% in the region).

Approach to credit quality assessments

  • After the start of the recession, the industry told us they checked trade references more often than before. However, financial statements and bank references remain the most frequently used sources for creditworthiness assessments.
  • The industry prioritises evaluating the customer’s profitability and payment history, with the majority reporting they will continue to monitor these areas over the coming months.

Approach to credit management

  • Following the economic downturn, businesses sent outstanding invoice reminders more frequently and resorted to self-insurance more often than last year. Over the coming months, respondents told us they plan to increase the number of discounts to encourage early payment of invoices.
  • 60% believe their customers’ creditworthiness will improve over the next six months, three times as many as those who anticipate deterioration and those who believe there will be no change. (Regional average: 54% expect improvement and 15% expect deterioration).
  • 53% considers the effective collection of outstanding invoices to present the greatest challenge to profitability in 2021. This compares to 45% with the same concern at regional level.

2021 industry outlook

  • 48% of respondents expect the domestic economy to improve over the next six months (regional average: 57%). 43% expect it to get worse (regional average: 27%). 48% expect the global economy to grow, 45% expect it to decline. 42% foresee improvement in international trade while 48% anticipate deterioration.

Chemicals

Late payments and cash flow

  • Late payments affect nearly 60% of the total value of B2B invoices (significantly up from last year’s 33%). Due to the pandemic, 47% of respondents reported having to wait longer to cash in overdue invoices, up to 23 days on average. 33% reported no change in the average invoice-to-cash turnaround, while the remainder cashed in overdue invoices earlier than they did before the pandemic.
  • Average DSO increases of up to 10% were reported by 41% of respondents, while 53% reported increases of more than 10%. Currently DSO stands at an 86-day average (almost in line with the 83-day regional average).
  • 45% of businesses told us that their cash flow was negatively affected after the outbreak of the pandemic (higher than the 39% average for the region). 41% reported a no impact (regional average: 40%).
  • To avoid liquidity shortages and reduce costs, businesses most often delayed payments to their suppliers or laid off staff (43% of respondents for each).

Approach to credit quality assessments

  • After the economic downturn, businesses sourced credit information directly from their customers more often using customer financial statements for assessments of creditworthiness.
  • The industry prioritises evaluating their customers’ financial flexibility and ability to generate cash. This, along with the customers’ payment hisotry, will be the key indicators businesses will monitor over the coming months.

Approach to credit management

  • The Spanish chemicals industry told us they relied on self-insurance more often following the economic downturn, while those that had trade credit insurance in place told us they used it more extensively than before the pandemic. Over the coming months, nearly 70% the industry told us they plan to make wider use of self-insurance than they did last year and also plan to request payment guarantees more often.
  • 66% of businesses expect their B2B customers’ creditworthiness to improve in 2021 (significantly higher than the regional average of 49%). 19% expect deterioration (regional average: 22%).
  • 52% consider a fall in demand to present the greatest challenge to profitability in 2021 (regional average: 39%), followed by the effective collection of outstanding invoices follows suit (reported by 51%, regional average: 37%).

2021 industry outlook

  • 57% expects the domestic economy to improve over the next six months (regional average: 58%). This is significantly more than the 39% expecting it to deteriorate (regional average: 29%). 49% expects the global economy to decline while 39% expects it to improve. A brighter outlook for international trade is anticipated (52% optimistic, 33% pessimistic).

54%

of the businesses polled in Spain reported increases in DSO of up to 10%. Increases of more than 10% were recorded by 41% of businesses.

Atradius Payment Practices Barometer – November 2020

Construction Materials

Late payments and cash flow

  • Late payments affect 40% of the total value of B2B invoices (compared to last year’s 30%). 41% of respondents reported having to wait longer to cash in overdue invoices due to the economic downturn, up to 31 days on average. For 51%, there was no change in the average invoice-to-cash turnaround, while 8% of respondents reported cashing in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 67% of businesses. Increases of more than 10% were re- ported by 33% of businesses. Currently DSO stands at a 66-day average (above the 91-day average for the region).
  • 47% told us they experienced cash flow difficulties due to the economic downturn (regional average: 32%). 38% reported no impact on cash flow (notably lower than the 50% of respondents in the industry at a regional level).
  • 45% reported increasing the amount of time, costs and resources they spent on chasing unpaid invoices (regional average: 33%).

Approach to credit quality assessments

  • Following the downturn most businesses started monitoring customer financial statements more closely. Businesses plan to retain these as their primary source of credit information, complemented by information provided directly from the customer.
  • Businesses prioritise evaluating the customer’s profitability and ability to generate cash and told us they plan to more closely monitor their customers’ financial flexibility over the coming months.

Approach to credit management

  • The construction materials industry told us they strengthened their credit management practices by requesting discounts for early payment of invoices more often than before the pandemic. Many businesses also began to self-insure. Looking ahead, businesses told us they plan to increase requests for payment guarantees.
  • 41% of respondents expect their customers’ creditworthiness to improve over the coming months (regional average: 39%). 29% expect to see deterioration (regional average: 28%).
  • The industry believes the greatest challenges to profitability in 2021 will be: containment of costs (reported by 47%, compared to 49% of the industry at regional level) and a fall in demand for products and services (45%, compared to 34% regional average).

2021 industry outlook

  • 49% of the Spanish construction materials industry expects the domestic economy to deteriorate over the next six months (regional average 25%). 40% expects it to improve (51% in the region). 52% expects the global economy to deteriorate (regional average: 33%) and 38% expects improvement (regional average: 40%). 43% anticipates improvement in international trade (regional average: 47%) and 41% deterioration (regional average: 28%).

Steel / Metals

Late payments and cash flow

  • Late payments affect 63% of the total value of B2B invoices in the Spanish steel/metals industry (higher than last year’s 29%). 44% of respondents reported having to wait longer to cash in overdue invoices, up to 22 days on average. For 52%, there was no change in average invoice-to-cash turnaround. The remainder reported cashing in overdue invoices earlier than they did before the pandemic.
  • 62% of businesses reported DSO increases of up to 10%, while 38% reported increases of more than 10%. DSO currently stands at a 45-day average. This is significantly shorter than the 110-day regional average.
  • 41% of respondents reported a negative impact on their cash flow following the onset of pandemic and 36% reported no impact. In the region as a whole, 39% reported a negative impact and 36% no impact.
  • 50% of the industry told us they increased the amount of time, costs and resources they spent on chasing unpaid invoices (regional average: 36%). 33% said they withheld deliveries pending payment of invoices (regional average: 17%).

Approach to credit quality assessments

  • Following the onset of the pandemic, the industry told us they changed the way they approached credit assessments, making wider use of credit reports from specialist credit agencies. These are now added to the more traditional sources: financial statements, bank reference and trade references.
  • The industry currently prioritises evaluating their customers’ financial flexibility and ability to withstand unexpected shifts in the economic and business environment. They plan to continue with this approach during 2021.

Approach to credit management

  • The industry told us they strengthened their credit management practices by requesting payment guarantees more often and offering discounts for early payment of invoices. Over the coming months, nearly 80% told us they plan to use trade credit insurance to protect their credit-based sales ledger (regional average: 44%).
  • 41% of the industry expects their customers’ creditworthiness to improveover the coming months (regional average: 39%). 17% expects it to get worse (regional average: 20%).
  • 53% of respondents believe the continuation of the pandemic presents the greatest challenge to profitability next year (regional average: 35%). In addition 50% expressed concern over 2021 cash flow levels (regional average: 34%).

2021 industry outlook

  • 70% of the Spanish steel/metals industry expects the domestic economy to improve over the next six months, significantly more than the 26% that expect it to deteriorate. 62% expects the global economy to grow (regional average: 47%), while 32% expects it to decline. 62% believe international trade will grow (regional average: 54%), while 21% expect it to shrink (regional average: 26%).

Transport

Late payments and cash flow

  • Late payments affect 55% of the total value of B2B invoices in the Spanish transport industry (compared to last year’s 34%). 45% of respondents reporting having to wait longer to cash in overdue invoices, up to 23 days on average. For 36%, there was no change in average invoice-to-cash turnaround. 19% of businesses said they cashed in overdue invoices earlier than they did before the pandemic.
  • 47% reported DSO increases of up to 10%, while 45% reported increases of more than 10% compared to before the pandemic. Currently DSO stands at a 95-day average (compared to the 134-day regional average).
  • 63% of respondents told us the economic downturn had a negative impact on their revenue (regional average 56%). 51% reported cash flow difficulties (regional average: 36%)
  • 47% of businesses increased the time, costs and resources they spent on chasing unpaid invoices (regional average: 34%). 33% told us they withheld services pending payment of invoices. (regional average: 20%).

Approach to credit quality assessments

  • In response to the pandemic recession, businesses told us they sourced more credit information directly from the customer. This information, along with the customers’ financial statements, bank references and payment histories are now the sources regularly used to evaluate customer credit standings.
  • Priority is given to evaluating the customer’s profitability and ability to generate cash. This approach will remain unchanged over the coming months, but will be complemented by assessments of the customer’s financial flexibility.

Approach to credit management

  • Following the onset of the economic downturn, respondents told us they strengthened their credit management practices by requesting payment guarantees, offering discounts for early payment and avoiding concentrations of credit in their sales ledgers. Over the coming months businesses plan to make wider use of trade credit insurance in addition to sending invoice payment reminders more frequently.
  • 43% of respondents expect customer creditworthiness to improve; the same percentage anticipates deterioration (re- gional average: 40% expects improvement, 29% deterioration).
  • 45% of respondents believe the continuation of the pandemic presents the greatest challenge to profitability next year (regional average: 31%). In addition 41% expressed concern over 2021 cash flow levels (regional average: 29%).

2021 industry outlook

  • 50% of respondents expect the domestic economy to deteriorate over the coming months, while 37% expect it to get better. 37% expects the global economy to grow, while 41% anticipates deterioration. 43% believes international trade will grow and 46% believes the opposite.

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