Can businesses survive the fragile payments environment?

Payments Practices Barometer survey reveals increasing payment delays and bad debt

The results of our annual Payment Practices Barometer survey have now been collated, revealing insights from businesses of different sizes across a variety of sectors in each of the world’s major markets. These include Western Europe, Central and Eastern Europe, North America, Asia, Australia and the UAE. Although the detail varies from region to region, and even between individual markets, a clear pattern has emerged: businesses are grappling with an elevated risk of payment delays, write-offs and insolvencies.

How different is the payments experience among regions and markets?

The greatest differences in payments behaviour are apparent within regions. For example, in Western Europe businesses in Germany reported the largest volume of late payments (57% of the total value of invoices) and bad debts (8% were written off). This is higher than the regional average of payment delays amounting 47%  and 6% write offs. Germany’s experience also starkly contrasts the experience of businesses in the Netherlands which reported 35% late payments and 4% write-offs.

A similar pattern of large variation within geographic regions can be seen in Asia. Chinese businesses told us that 35% of their total sales were overdue and 4% were bad debts. At the other end of the scale, India reported an average of 63% late payments and 7% bad debts.

What is clear, despite such variations, is that there is an elevated risk of late and non-payments throughout the world.

Why is there an increased global risk of bad debt and late payments?

Global trade conditions are currently challenging. Global economic growth is subdued and the insolvency risk is high. Tariff escalation and policy uncertainty has put the brakes on economic growth in several markets and is translating into a squeeze on cash flow for many businesses. 

Insolvency is a primary cause of bad debts and can be the first domino to fall when an entire value chain is put under pressure. Our economists predict insolvency risk to remain elevated for some time, with a further year-on-year increase of 3% in 2026.

How are credit managers responding to the current risk environment

Virtually all of the credit managers and finance officers we interviewed for the Payment Practices Barometer Survey employed a range of strategies to manage risk. Interestingly, many told us that they actually lengthened payment terms in order to support customers during periods of squeezed cash flow and promote ongoing trade.

More commonly credit managers told us they are employing tripartite approach to managing risk which involves trade credit insurance, stronger business intelligence including renewed customer credit assessments and internal provisioning.

So can businesses survive the fragile payments environment? Of course businesses can survive during these more challenging times. However, as with any credit transaction, businesses can best minimise risk by doing all they can to understand their customer, their customer’s market and by insuring their accounts receivable.