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|Atradius publishes Asia Pacific payment practices barometer|
|Monday, 23 November 2015|
Businesses trading in the Asia Pacific region can make more informed decisions following a new Atradius report explaining local payment practices.
The trade credit insurer’s Payment Practices Barometer analyses payment behaviours and trends in key global countries to inform businesses of potential risks when trading overseas. The report, which surveys businesses in Australia, China, Hong Kong, India, Indonesia, Japan, Singapore and Taiwan, reveals:
Trading with credit: Almost all Asia Pacific businesses (91%) have granted trade credit to B2B customers in the last year - higher than in Europe (72%) and the Americas (89%). Nearly half (43%) of all foreign trade is made on credit – up 3% this year.
Time to pay: Asia Pacific businesses give their customers an average of 33 days to pay invoices - five days more than in Europe and one day more than the Americas. Australian businesses set the shortest payment terms at 20 days and Japan is the most lenient at 47 days.
Foreign v domestic terms: Payment terms for domestic and foreign customers vary across countries. In China and Hong Kong, foreign customers are given slightly longer to pay invoices than customers domestically whereas in Taiwan and Japan, it is the opposite.
Changing terms: In Japan and China, payment terms are now up to three weeks longer than two years ago. Hong Kong businesses also extended longer terms, particularly to overseas customers. However, Indonesia has shortened domestic payment terms and India has shortened terms to foreign B2B customers.
Business challenges: Nearly a quarter of respondents consider cost containment to be one of the biggest challenges to business profitability – particularly so for businesses in Japan, Singapore and China. Businesses in Australia and Singapore are most concerned about a fall in demand while Indian businesses are challenged by the collection of outstanding invoices.
Late payments: Nearly half (45%) of the total value of export sales on credit are paid late. On average, foreign B2B customers make their overdue payments 28 days overdue with businesses in China waiting the longest at 41 days. In total, around 10% of all B2B invoices remained unpaid after 90 days.
Causes of late payments: Almost half (46%) cited insufficient availability of funds as the main cause of late payment by customers. Nearly a third (30%) said that payment delays were intentional – meaning that customers use trade credit as a way of alternatively financing their business operations. In Indonesia and India, the complexity of payment procedures was the most cited reason for late payments from foreign customers whereas two in five businesses in Singapore, China and Hong Kong experienced delays due to their customers’ liquidity issues.
Uncollectable: 2% of receivables in the Asia Pacific is written off as uncollectable. Businesses lose around 65% of the value of their domestic and 46% of the value of their foreign B2B receivables that are not collected within 90 days after the due date. The most frequently (54%) cited reason for non-collection is that customers have become bankrupt or ceased trading.
Sector insights: Uncollectable receivables occur most frequently in the construction, consumer durables, electronics and services sectors.
Jason Curtis, Commercial Director at Atradius UK, said: “The risks of international trade vary between each economy, sector and country. It is imperative that businesses protect themselves from the risks of doing business to ensure they develop successful trade relationships overseas, and more importantly that they actually get paid for the goods or services they have delivered. Suppliers need to have comprehensive knowledge and regularly updated information on their customers’ financial strength and stability.
“As a leading trade credit insurer, Atradius not only steps in to pay out claims in the event of non-payment but also provides real-time analysis and advice to customers as part of a proactive risk management strategy to protect businesses and facilitate trade. With a strategic presence in markets across the globe, our experts are in the right place at the right time to support our customers and mitigate risk.”
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