Eastern Europe payments practices
Less businesses in Eastern Europe are offering credit to customers, according to the 'Atradius Payment Practices Barometer for Eastern Europe' a report by trade credit insurer Atradius (www.atradius.co.uk)
The report reveals that the proportion of B2B credit sales in Eastern Europe has decreased from an average of 40.3% in 2017 to 36.9% this year. Businesses in Hungary remain the most inclined to offer credit terms with an average of 57.6% of B2B sales made on credit, although here too, credit sales are at a lower level than a year ago. In contrast, businesses in Romania seem to be the least willing to offer credit terms with an average of just 17.7% of B2B sales transacted on credit.
Payment delays due to insufficient availability of funds by domestic B2B customers in Eastern Europe increased markedly with 68.8% of respondents identifying the issue, an increase of over 10% from the previous year, says the report. Nearly a third (31%) of respondents reported that domestic B2B customers pay invoices late because they use outstanding invoices as a form of financing. Moreover, domestic B2B receivables were reported to be uncollectable most often due to the customer being bankrupt or out of business (64.2% of respondents, up from 55.8% last year). However, many Eastern European respondents invoicing electronically, have noticed an improvement in speed of payment. Two thirds (66%) of respondents invoiced their B2B customers online over the past year.
“Globally, 2018 promises to be another year of strong growth, with global GDP growth pushing up to 3.2%, the highest level since 2011. However, a slowdown of the global economy may expose some structural issues, peculiar to Eastern European economies, weighing on their growth. This could trigger an increase in trade credit risk,” warns Andreas Tesch, Chief Market Officer, Atradius.
“It is essential to pay close attention to the payment behaviour of buyers and limit payment default risks through credit insurance protection. This can enable businesses trading with Eastern Europe to expand growth opportunities, improve cash flow and protect profitability. While Eastern Europe is forecast to grow a steady 3% this year, mainly due to robust domestic demand, strong momentum is forecast to ease to 2.5% in 2019 as regional GDP growth eases and the export trade stimulus from the Eurozone cools off. This, along with a longer DSO, is forecast to weigh on liquidity, potentially triggering an increase in trade credit risk," says Tesch.