Cash flows squeezed as USMCA feels effect of COVID-19

A survey into business-to-business payment behaviour has revealed a massive increase in late payments across USMCA. The annual USMCA Payment Practices Barometer is a poll of businesses throughout the USA, Mexico and Canada. This year’s survey results reveal compromised cash flows and an increased reliance on bank finance, as businesses grapple with COVID-19 containment measures.

Across the region, 43% of the total value of invoices is­sued were unpaid by the due date, a sharp increase from 25% last year. The value of long overdue invoices (invoices more than 90 days overdue), has doubled. In addition, 4% of the total value of outstanding invoices has been written off.

Businesses throughout the US reported a 72% year-on-year increase in payment defaults. Individual sectors also revealed signs of economic stress. Mexico’s paper industry, for example, had to write-off 8% of the total value of receivables as uncollectable. 40% of the total value of B2B invoices in Canada’s agri-food and chemicals sectors were overdue.

With all three countries now in recession, the outlook is bleak. Despite this, the majority of businesses surveyed expect growth in the coming months. This optimism was grounded in the belief that banks will continue to provide credit and will cushion the effects of poor cash flow.

In addition, the majority of businesses polled plan on tightening their credit control procedures. They reported that this will involve outsourced risk management, such as credit insurance, together with in-house techniques including reducing risk concentrations and an increasing debt collection resources.

The 2020 Atradius Payment Practices Barometer for the USMCA was conducted in Canada, Mexico and the US. Both the regional and the country reports can be downloaded from the publications section

All content on this page is subject to our Disclaimer, available here.