Amsterdam, 26 November 2014 – Asia Pacific: businesses’ concern about cash flow up from last year
The latest edition of the Atradius Payment Practices Barometer for Asia Pacific reveals that more businesses in the region than last year feel pressured by the stresses of maintaining sufficient cash flow. This reflects growing concern about a deterioration of the credit quality in several countries in the region.
The Atradius Payment Practices Barometer survey respondents in Asia Pacific reported that, on average, 36.2% of the total value of their B2B receivables remained unpaid when due (average for the Americas and for Europe: 38.4% and 36.4% respectively). While the primary reason for payment delays from domestic customers is insufficient funds (cited by 47.3% of survey respondents), foreign invoices are more likely to go unpaid due to complexity of payment procedures. Complexity of payment procedures for foreign customers was experienced most by Chinese respondents (55.9%). Around 30% of respondents in the region stated that domestic and foreign buyers often delay payment as a source of surrogate financing.
With 4.4% of the B2B receivables remaining unpaid after 90 days overdue, and half of this value written off as uncollectable, respondents in Asia Pacific lose, on average, 50% of the total value of their receivables that are not paid within 90 days of the due date (average for Europe and the Americas: 35.0% and 51.9% respectively).
Against this backdrop, it comes as no surprise that there is growing concern about cash flow levels across several countries in the region. Overall, more than one in three respondents in the region consider this their biggest challenge to profitability this year. By country, this is felt particularly keenly in Taiwan (43.5% of respondents). Across the region, nearly 72% of respondents reported they become concerned about the sustainability of their businesses when DSO exceeds the average payment term by 31 days. 70% of survey respondents use at least one credit management practice to protect their cash flow and improve the financial stability of their business. India, at 85.4%, was most likely to use some form of credit management – possibly reflecting the changeable economic conditions, in particular, slowing economic growth.
This is a clear reflection of changeable economic conditions in a region whose overall growth forecasts seem to be impacted by various factors, such as China’s economic growth slowdown, weaker domestic demand in a few of the emerging Asia economies due to tightening credit conditions, and sluggish global demand affecting the Asia Pacific countries with tight trade links to advanced economies.
Eric den Boogert, Director of Atradius Asia commented “In Asia, China’s economic policy largely impacts the entire region. Due to decreased imports and investments, regional growth expectations have been revised downwards. Growth expectations for India and Indonesia are uncertain. In several countries in the region, there have been concerns about increasing debt and deteriorating credit quality. This is very likely to cause a worsening of the payment behaviour in several countries in the region”.
The complete report highlighting the findings of the 2014 edition of the Atradius Payment Practices Barometer for Asia Pacific can be found as related content below.
The Atradius Group provides trade credit insurance, surety and collections services worldwide and has a presence through more than 160 offices in 50 countries. Atradius has access to credit information on 100 million companies worldwide. Its products help protect companies throughout the world from payment risks associated with selling products and services on credit.