Businesses trading with customers in Eastern Europe are being warned to expect a potential increase in payment defaults, reports a new paper by trade credit insurer Atradius
The Payment Practices Barometer by Atradius analyses payment behaviours of businesses with the latest report focusing on Eastern Europe, including the Czech Republic, Hungary, Poland, Slovakia and Turkey. The report reveals that 86% of Eastern European customers have paid their B2B invoices late over the last year. And for 58%, the reason was attributable to customers’ liquidity issues – compared to 52% of Western European businesses. The reports highlights Hungary as experiencing the highest number of liquidity related late payments at 78%.
The Atradius report also found that 45% of the average total value of B2B invoices billed to Eastern European countries remained unpaid after the due date – slightly higher than the 42% average for Western Europe. On average, 10% of B2B invoices with Eastern European companies became delinquent – unpaid 90+ days after the due date – and 1% written off as uncollectable.
The consensus view among Eastern European businesses is that there will be an overall deterioration in the payment behaviour of their B2B customers over the coming 12 months. In particular, more respondents (26%) anticipate deterioration rather than improvement (16%).
Richard Reynolds of Atradius, which protects businesses from the risk of non-payment and advises on the risks and opportunities of where to trade domestically and across the globe, said:
“Non-payment is the single biggest risk to a business, squeezing profit margins and placing strain on cashflow, and for companies unable to mitigate against the risks can push a business to the brink. It is imperative that companies make it their business to know the financial standing and payment behaviours of their customers and be prepared for the impact of any events or issues in the wider landscape - economic, political and cultural.
“The growth outlook in some regions and countries across the world appears to be brighter than before, but risk is still a significant factor. Political uncertainty in the Eurozone is weighing on the region’s medium-term growth outlook. In emerging Asia, China’s economy, while still enjoying high growth of 6.5%, is slowing from 6.7% last year. In Eastern Europe, the structural weaknesses and negative impact of sanctions on productivity and investment continues to weigh on growth in Russia. The close trade ties among world regions means that a deteriorating business and economic climate in one or more markets could have negative impacts in other markets also, with potentially negative consequences for the global insolvency environment. Against this backdrop, a strong focus on the management of trade credit risk is essential to maintaining the financial viability of a business.”
The complete report highlighting the findings of the May 2017 edition of the Atradius Payment Practices Barometer for Eastern Europe can be downloaded for free at www.atradius.co.uk. You can also follow us on Twitter @AtradiusUK