RiskTech Forum

Atradius Survey Finds B2B Payment Defaults On The Rise In Asia-Pacific

Posted: 22 November 2012  |  Source: Atradius

Over 30% of B2B receivables unpaid at due date, more than 5% defaulted upon

A survey conducted by leading trade credit insurer Atradius has found that businesses in Asia-Pacific have experienced a significant rise in “uncollectable” payments on trade debt. The 3.6% figure in 2011 has increased to 5.0% in 2012. The latest Atradius Payment Practices Barometer, which focuses on Asia-Pacific, found that over half of the respondents also planned to increase measures to protect their businesses against deterioration of trade credit risk.

The November 2012 Atradius Payment Practices Barometer polled 1,661 businesses in Australia, China, Hong Kong, India, Indonesia, Japan, Singapore and Taiwan.  On average, 30% of the total value of domestic and foreign B2B invoices issued by survey respondents remained unpaid at the due date. The highest percentage of overdue B2B invoices was approximately 35% in Hong Kong and the lowest fewer than 20% in Japan.

In addition, over 10% of invoices remained unpaid after three months overdue and over 5% of B2B receivables were defaulted upon. This percentage reached a high of 7% in India and Singapore, and a low of around 2% in Japan. The impact of the significant levels of late payment is evidenced by the variance between the average payment term recorded in Asia-Pacific (32 days) and the average Days Sales Outstanding of 44 days.

Domestic payment delays due to liquidity restraints have also risen to 53.5% from 47.7% in 2011. Indonesian businesses are experiencing the toughest time, with 70% experiencing problems with domestic payments owed to them, whilst payments from foreign customers were mostly delayed because of the complexity of the payment procedure or inefficiencies of the banking system - around 45% of respondents in each case.

To reduce payment delays and payment defaults, over half of the survey respondents (53%) anticipate checking buyers’ creditworthiness more often, particularly respondents in Singapore (68.0%) and China (64.5%).

Alun Sweeney, Regional Director of Atradius UK & Ireland said:
“No matter where a business is trading, in this economic climate, risk mitigation is a necessity, not a choice.

“With little or no growth in many primary European export destinations, export-orientated economies across Asia-Pacific will find stable growth challenging in 2013. Specifically, only Ireland ,Austria and Germany are forecast growth of 1% or more next year, whilst insolvencies are forecast to improve only in US, Japan, Norway and Canada. That Asian businesses trading with Western Europe are clearly alert to the inherent risks of trading in the present climate and are stepping up their levels of credit protection - and using trade credit insurance in particular, demonstrating that they are trading with prudence.”