Overview of payment practices

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

Chemicals

Late payments and cash flow

  • Late payments in the Swiss chemicals industry affect 46% of the total value of B2B invoices (up from last year’s 26%). 31% of respondents reported having to wait longer to cash in overdue invoices, up to 17 days on average. For 65% of respondents, there was no change in average in- voice-to-cash turnaround, while only 4% of respondents cashed in overdue invoices earlier than they did before the pandemic.
  • Average DSO increases of up to 10% were reported by 71% of respondents. 21% reported increases of above 10%. Currently DSO stands at a 87-day average. This compares to the 83-day average seen in Western Europe.
  • 40% of the industry told us their cash flow was negatively affected by the outbreak of the pandemic (regional aver- age: 39%). 49% reported a negative impact on revenue (regional average: 53%).
  • Late payments caused 40% to lay off staff (regional av- erage: 30%). 31% increased the time, costs and resources to chase past due invoice (regional average: 39%).

Approach to credit quality assessments

  • After the onset of the economic crisis, businesses changed the way they approached credit checks. Infor- mation provided directly by customers, financial state- ments and bank references are now the most common sources for creditworthiness assessments in the indus- try.
  • Industry respondents told us they prioritise evaluating their customers’ past payment history and financial flex- ibility. Over the coming months, this approach will not change.

Approach to credit management

  • Following the onset of the economic crisis, the industry offered discounts for early payment of invoices and sent overdue invoice payment reminders more frequently. A sizeable percentage began to self-insure against bad debt. Over the coming months, payment reminders will be the credit management technique most businesses plan to make wider use of.
  • 32% of respondents expect customer creditworthiness to improve over the coming months (regional average: 49%), while 23% expects deterioration (regional average: 22%).
  • 42% of the industry believes the greatest challenge to profitability in 2021 to be containment of costs (regional average: 39%). 38% are worried about potential supply chain disruptions (regional average: 30%).

2021 industry outlook

  • 57% of the Swiss chemicals industry expects the domes- tic economy to improve over the next six months (regional average 58%). 23% expects it to deteriorate (regional average: 29%). 41% expressed optimism about the global economy (regional average: 43%), with a minority of 32% anticipating deterioration. 45% predicts an improvement in international trade (same as regional average).

Construction

Late payments and cash flow

  • Late payments affect 34% of the total value of B2B invoices in the Swiss construction industry (up from last year’s 25%). 45% reported having to wait longer to turn overdue invoices into cash, up to 25 days past the due date on average. 55% reported no change in average invoice-to-cash turnaround. None of the businesses polled in the industry cashed in overdue invoices earlier than before the pandemic.
  • Average DSO increases of up to 10% were reported by 85% of respondents. Increases above 10% were reported by 15% of businesses. Currently DSO stands at a 170-day av- erage (well above the 70-day regional average).
  • 48% revealed revenue levels were negatively affected by the pandemic downturn (regional average: 49%). 41% re- ported no impact (regional average: 26%). Negative im- pact on cash flow was reported by 46% of businesses (regional average: 34%), with 35% reporting no impact (regional average: 34%).
  • 32% of respondents spent more on time, costs and re- sources to chase unpaid invoices (regional average: 29%). The same percentage of respondents delayed payments to suppliers (regional average: 36%).

Approach to credit quality assessments

  • The customer’s financial statements, alongside bank ref- erences and information sourced directly from the cus- tomer are now the most common sources for credit checks in the industry.
  • Businesses in the industry prioritise evaluating the cus- tomer’s past payment history, alongside their financial flexibility and ability to weather unexpected shifts in the business and economic environment. The majority of businesses plan to continue to monitor these areas over the coming months.

Approach to credit management

  • Most respondents told us they requested cash payments more often and have intensified debt collection activities both internal and with outsourced partners. Looking ahead, businesses told us they will keep on following this approach.
  • 31% expects customer creditworthiness to improve over the coming months (regional average: 48%). 11% expects it to get worse (regional average: 17%).
  • 47% of the industry considers the greatest challenge to profitability in 2021 to be the containment of costs (re- gional average: 43%.) The continuation of pandemic ranks second with 38% of the responses (regional aver- age: 21%), followed by 37% that cite difficulties maintain- ing adequate cash flow (regional average: 47%).

2021 industry outlook

  • 52% of respondents expect the domestic economy to improve over the next six months, while 37% expects it to get worse. 33% expects the global economy to improve (regional average: 49%). 42% expects international trade recover, fewer than the regional average of 51%.

Late payments in the Swiss construction materials industry affect

63%

of the total value of B2B invoices (compared to last year’s 22%).

Atradius Payment Practices Barometer – November 2020

Construction Materials

Late payments and cash flow

  • Late payments in the Swiss construction materials in- dustry affect 63% of the total value of B2B invoices (com- pared to last year’s 22%). 18% of respondents reported having to wait longer to cash in overdue invoices, up to 15 days on average. However, for nearly 73%, there was no change in the average invoice-to-cash turnaround. 9% reported cashing in overdue invoices earlier than they did before the pandemic.
  • Average DSO increases of up to 10% were reported by 76% of construction materials businesses. Increases of DSO above 10% were reported by 16%. Currently DSO stands at a 140-day average (regional average: 91 days).
  • 44% of respondents told us the economic crisis had a negative impact on their revenue (regional average: 47%). 20% reported a negative impact on cash flow (re- gional average: 32%), while 66% reported no impact on this (regional average: 50%).
  • 42% of the construction materials industry laid off staff (regional average: 34%). 32% said that they needed to ob- tain additional financing from external sources (regional average: 24%).

Approach to credit quality assessments

  • After the onset of the pandemic, the construction materials industry began to source credit information directly from the customer more often and will continue to do so. In addition the industry plans on monitoring financial state- ments, bank and trade references, and credit reports from specialist agencies.
  • Survey respondents prioritise evaluating their customers’ past payment history, financial flexibility and debt capac- ity. They plan to continue with this approach next year.

Approach to credit management

  • The industry told us they strengthened their credit man- agement practices both by offering discounts for early payment of invoices and avoiding credit risk concentra- tions in their sales ledgers. However, a large majority of businesses said they also began to practise self-insurance and plan to continue doing so over the coming months
  • 22% of businesses in the industry expects customer cre- ditworthiness to improve, and 14% to deteriorate, next year. For 64% there will be no change (32% at regional level share this opinion).
  • 65% of the industry considers cost containment to pres- ent the greatest challenge to profitability in 2021 (re- gional average: 49%). Effective collection of overdue invoices ranks second with 44% of respondents (regional average: 42%).

2021 industry outlook

  • 56% expects the domestic economy to improve over the next six months (regional average: 51%). 10% expects it to deteriorate (regional average: 25%). 42% expects the global economy to improve and 32% expects deterioration. 36% expects international trade to improve, much lower than the 47% in the regional overall.

Steel / Metals

Late payments and cash flow

  • In the Swiss steel/metals industry, 40% of the total value of B2B invoices remained outstanding at the due date (higher than last year’s 28%). 22% of respondents re- ported having to wait longer to cash in overdue invoices, up to 10 days on average. For 68%, there was no change in the average invoice-to-cash turnaround. 10% of busi- nesses reported cashing in overdue invoices more quickly than they did before the pandemic.
  • Average DSO increases of up to 10% were reported by 60% of the businesses polled. Increases of more than 10% were reported by 32%. Currently DSO in the industry stands at a 77-day average (well below the 110-day aver- age for the industry in Western Europe).
  • 51% of the survey respondents reported negative impact of the economic crisis on cash flow (regional average: 39%), 55% reported loss of revenue (regional average: 46%).
  • To safeguard liquidity levels, the majority of respondents (52% each) told us they resorted to factoring or trade debts securitisation (regional average: 50% and 45% re- spectively).

Approach to credit quality assessments

  • Following the onset of the economic downturn, the steel/metals industry requested credit information di- rectly from their B2B customers more often, adding this to their usual sources of credit information, financial statements and bank references.
  • The industry prioritises reviewing both the customer’s past payment history and financial flexibility, namely the ability to weather unexpected shifts in the economic and business environment. Respondents say they will also assess their customers’ debt capacity over the com- ing months.

Approach to credit management

  • After the onset of the pandemic the industry intensified their credit management efforts by increasing the fre- quency of outstanding invoice reminders, raising finance through trade debt securitisation and requesting cash payments. Over the coming months, the industry plans to increase reliance on factoring.
  • 26% of respondents alike expect customer creditworthi- ness either to improve or deteriorate over the coming months. Regional average: 39% expects improvement and 20% deterioration.
  • 42% of businesses consider potential bank lending re- strictions to be the greatest challenge to profitability in 2021 (regional average: 35%). This is closely followed by 40% who cite effective collection of outstanding invoices and 40% the continuation of the recession (regional av- erage: 40% and 35% respectively).

2021 industry outlook

  • 49% of industry respondents expect the domestic economy to improve over the coming months (regional average: 63%). 33% expect it to get worse. 34% anticipate an im- provement in the global economy (regional average: 47%), while 33% expect deterioration. 45% expect international trade to get better (regional average: 55%), whereas 28% are more pessimistic.

Transport

Late payments and cash flow

  • Late payments affect 62% of the total value of B2B invoices (compared to last year’s 34%). 22% of respondents reported having to wait longer to cash in overdue invoices, up to 15 days on average. For 73% of respondents, there was no change in average invoice-to-cash turnaround. 5% the businesses said that they cashed in overdue invoices earlier than before the pandemic.
  • 81% of businesses reported DSO increases of up to 10%, while 16% reported increases of more than 10% compared to before the pandemic. Currently DSO stands at a 160-day average (compared to the 134-day regional average).
  • 48% of respondents in the industry told us the recession had a negative impact on their revenue (regional average 56%). However, more respondents in Switzerland (47%) than in Western Europe (39%) said that their cash flow lev- els were unaffected.
  • 25% of businesses increased the time, costs and resources spent on chasing unpaid invoices (regional average: 34%).

Approach to credit quality assessments

  • In response to the recession, businesses told us they paid closer attention to the evaluation of credit information provided directly by the customer, as well as of bank ref- erences than before. Over the coming months, they will keep on monitoring their customers’ past payment history and their financial statements.
  • Priority is given to evaluating both the customer’s financial flexibility and ability to generate cash. This approach will remain unchanged over the coming months, but will be complemented by assessments of the customer’s ability to access external financing.

Approach to credit management

  • Following the onset of the recession, survey respondents told us they strengthened their credit management practices by offering discounts for early payment of invoices, re- questing cash payments and payment guarantees more often. Businesses told us they plan to speed up debt collection and avoid credit risk concentrations in their sales ledger over the coming months.
  • 23% of respondents from the industry expect their B2B customers’ creditworthiness to improve (regional average: 40%). 27% expect deterioration over the coming months (regional average: 29%).
  • 47% of the industry believe that cost containment is the greatest challenge to profitability next year (regional av- erage: 41%). Supply chain disruptions rank second (41%, compared to 35% in the region).

2021 industry outlook

  • 43% of respondents expect the domestic economy to improve over the coming months (regional average: 52%). 38% expect it to get worse. 44% believes the global economy will deteriorate, while 28% expect an improvement. The same goes for international trade (44% pessimistic, 36% pessimistic).

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