Atradius Payment Practices Barometer Asia Pacific 2015
Atradius published recently its survey on payment terms and experiences. The survey shows an uptick in late payment of B2B invoices in China, which can have a knock-on effect on the liquidity of some businesses in several countries in Asia Pacific. Below is a compressed summary of the Atradius findings:
Survey results for Asia Pacific
Sales on credit terms: Businesses in Asia Pacific appear to make broad use of trade credit in both domestic and foreign B2B transactions. As our survey reveals, 91% of the respondents across the countries surveyed in the region (Australia, China, Hong Kong, India, Indonesia, Japan, Singapore and Taiwan) reported having granted trade credit to their B2B customers over the past year. This is slightly more than in the Americas (89%) and significantly more than in Europe (76.2%).
Average payment term” Both domestic and foreign B2B customers of respondents in Asia Pacific are given an average of 33 days from the invoice date to pay for goods and services purchased on credit (the Americas: 28 days; Europe: 32 days).
Overdue B2B invoices: 90.2% of the survey respondents in Asia Pacific (down from 97.5% in 2014) reported having experienced late payment of invoices from their domestic and foreign B2B customers over the past year (94.7% respondents in the Americas and 92.8% in Europe). Across most of the region, the percentage of respondents reporting late payment from B2B customers varies markedly. It is the highest in India at 97%, it is below the regional figure in Taiwan at 87.9%, dropping to a low of 63.2% in Japan. In all of the remaining countries surveyed, the percentage of respondents reporting late payments by B2B customers’ is above the regional average but do not exceed 95.4%.
Average payment delay: Domestic B2B customers of respondents in Asia Pacific settle payment on past due invoices, on average, not later than 25 days after the due date (compared to 30 days in the Americas and 22 days in Europe). Foreign B2B customers make their overdue payments, on average, 28 days after the invoice due date (the Americas: 37 days; Europe: 20 days). Average payment delays from B2B customers vary notably across the countries surveyed.
Key payment delay factors: In line with observations in the Americas and in Europe, most of the respondents in Asia Pacific (46.3%, down from 47.3% one year ago) reported that late payment of domestic B2B invoices is mainly attributable to their customers’ insufficient availability of funds (respondents in the Americas: 46.4% and in Europe: 53.8%). It is therefore vital for suppliers to have comprehensive knowledge and regularly updated information on their customers’ financial strength and stability. By country, late payment from domestic customers due to liquidity constraints was most often experienced by respondents in China (62%). Response rates across the other countries surveyed range from 50.5% in Indonesia to 20.7% in Japan.
Uncollectable accounts: An average of 2% of B2B receivables of respondents in Asia Pacific was reported to be written off as uncollectable (the Americas: 2.2% and Europe: 1.2%). After an average 1.4 percentage point decrease in 2014, the above mentioned rate increased again slightly (less than 1 percentage point) at the beginning of this year. By industry, uncollectable domestic and foreign B2B receivables in Asia Pacific stem mostly from the construction, consumer durables, electronics and business services, and overall services sectors.
Payment practices by industry: Survey respondents in Asia Pacific reported having granted trade credit mainly to B2B customers in the chemicals, construction, consumer durables, food, electronics, metals and services (financial and business) sectors over the past year. B2B customers in the electronics, metals and machines sectors were extended the most relaxed payment terms (averaging 34 days, 39 days and 41 days from the invoice date respectively). Average payment terms (domestic and foreign) do not differ significantly across the sectors.
For more insights into the payment practices by industry in each of the countries surveyed in Asia Pacific, please refer to the respective country reports which are an integral part of the 2015 edition of the Atradius Payment Practices Barometer for Asia Pacific. Free download onwww.atradius.com.
We recommend our readers to read the entire survey.