Asian suppliers face late payment risks from B2B clients

Late payments are pushing some suppliers to seek cash flow protection

NINE out of ten suppliers surveyed in Asia-Pacific experienced late payment of invoices from their B2B customers over the past year. To protect their businesses from late payments, 33.3% of the suppliers surveyed reported having taken specific measures to correct cash flow. Despite this, concern over an increase in days sales outstanding (DSO) appears to have grown significantly among suppliers surveyed in the region.

Most of the suppliers interviewed for the report led by Atradius, a provider of trade credit insurance, said that they had to protect their business by taking specific measures to correct cash flow. Despite the ongoing deceleration and rebalancing of the Chinese economy, GDP in Asia is forecast to grow 5.8% this year. Strong growth is not being experienced universally throughout the region with countries like Indonesia and Singapore showing some vulnerability to regional economic developments. India, however, appears to have taken over the role of a global growth leader.

Nine out of ten suppliers surveyed in the region reported having experienced late payment of invoices from their B2B customers. This translates into an average of 45.4% of the total value of B2B invoices being unpaid at due date. Late payment from domestic B2B customers occurred most often due to insufficient availability of funds (as reported by 43.8% of respondents in the region).

Foreign B2B customers, instead, delayed invoice payment was most often due to the complexity of the payment procedure. On average, survey respondents reported that they wrote off 2.1% of B2B receivables as uncollectable. This was mainly because the customer went bankrupt or out of business (47.4% of respondents), the debt was too old (36.2%) and the inability to locate the customer (35.4%).

Andreas Tesch, chief market officer of Atradius says, "In 2018, global GDP growth is expected to expand 3.0%. Despite this positive outlook for the global economy, it is essential to highlight that rising protectionism, monetary tightening, and the ongoing slowdown and rebalancing of China's economy may increase the uncertainty that businesses face. This could further cloud the global insolvency outlook, weakening business confidence, investment and consumer spending. With this in mind, the main focus of any business should be on protection of cash flow."

The Atradius Payment Practices Barometer for Asia Pacific gives insights into the key factors for customer payment delay, the challenges to business profitability, and the respondents' opinion on payment practice trends by industry in the next 12 months.