Payment Practices Barometer Summer 2010

Transcription

1 Payment Practices Barometer Summer 2010 Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

2 Legal disclaimer Legal disclaimer Survey results and content were based on data collected and tabulated by Heliview Research. The survey results and content is for informational purposes only and should not be considered as a substitute for professional advice in specific situations. Information on which the survey results were based was not audited or verified. The data and charts may not be copied or reproduced without permission and the content may not be modified. Although care has been taken to ensure data quality, Atradius N.V. its affiliates and subsidiaries and Heliview Research do not guarantee the accuracy or completeness of the survey or of any of the information presented herein. They will not be held liable for any inaccuracies or omissions the content may contain and the information is presented without warranty, express or implied. Atradius makes no representations that the content of the survey or the conclusions drawn therein are appropriate for every use in every jurisdiction. Those using the information do so at their own risk and are responsible for their own compliance with applicable laws or regulations. Liability waiver Atradius N.V. its affiliates and subsidiaries and the contributors assume no liability for any loss or damage as a result of errors or omissions in the information or for damages resulting from use, misuse or inability to use the data presented. Copyright by Atradius N.V. September 2010 Distributed in Spain, Portugal and Brasil by Crédito y Caución The survey was conducted by Heliview Research, Breda Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

3 Table of contents Table of contents 1 Survey design 1.1 Survey background Survey objectives Structure of the survey Perspectives evaluating payment practices Survey scope Sample overview Executive summary 2.1 Introduction Conclusions Core results Use of trade credit 3.1 Sales on credit terms Criteria influencing the decision to sell on credit terms Credit management practices 4.1 Average payment terms (domestic/foreign) Payment terms determinants Use of differentiated payment terms Early payment discounts Credit sales procedures (domestic/foreign) Impact of overdue invoices Change in credit management practices Customers payment behaviour 5.1 Average payment duration Average payment delays Payment timing Evaluation of customers payment behaviour Evaluation of business relationships with foreign customers Average Days Sales Outstanding (DSO) Appendix Your contacts at Atradius Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

4 1. Survey design Survey background 1.1 Atradius conducts regular surveys of corporate payment behaviour across a range of countries; its findings published in the Atradius Payment Practices Barometer. From its inception in 2006, when 1,200 companies from six European countries were interviewed to assess their views on the payment behaviour of their customers, the twice yearly Atradius Payment Practices Barometer has grown in scope each year. In the second survey of 2010 the 8th in the series 3,971 companies from 22 countries* (Australia, Austria, Belgium, Canada, China, Czech Republic, Denmark, France, Germany, Great Britain, Hong Kong, Hungary, Ireland, Italy, Mexico, the Netherlands, Poland, Slovakia, Spain, Sweden, Switzerland and the USA) have been surveyed. * In this report, we refer to the 22 countries and sovereign states included in the survey as 22 countries or the overall survey. Survey objectives 1.2 The Atradius Payment Practices Barometer addresses the following research questions: To what extent do companies use trade credit in the countries surveyed? What criteria influence their decisions regarding selling on credit terms? What are the factors that determine their credit management practices? What is the payment behaviour of the companies customers? What is the average DSO in the country? Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

5 1. Survey design Structure of the survey Determining the appropriate company contact for accounts receivable management 2. Ascertaining the interviewed company s industry and size 3. Ascertaining the industries and countries the company does business with 4. Assessing the amount of sales on credit terms and the criteria influencing the decision to sell on credit terms 5. Assessing the general data on credit management practices in the country: established payment terms for domestic and foreign customers (average days) payment terms determinants use of differentiated payment terms credit sales procedures impact of overdue invoices change in credit management practices 6. Evaluation of customers payment behaviour: average payment duration and delays payment timing evaluation of business relationships with foreign customers average Days Sales Outstanding (DSO) Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

6 1. Survey design Perspectives evaluating payment practices 1.4 payment practices = a. assessment of the overall mood concerning the payment practices of a country s companies relatively long-term indicator b. individual experiences with business partners number of days for incoming payments assumed frequency of payment delays short-term indicators National assessment or assessment of domestic customers International assessment or assessment of foreign customers Assessment of one region by foreign countries or assessment of customers from one region by foreign countries Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

7 1. Survey design Survey scope 1.5 Basic population Companies from 22 countries were monitored (Australia, Austria, Belgium, Canada, China, Czech Republic, Denmark, France, Germany, Great Britain, Hong Kong, Hungary, Ireland, Italy, Mexico, the Netherlands, Poland, Slovakia, Spain, Sweden, Switzerland and the USA) The appropriate contacts for accounts receivable management were interviewed Basic population Internet survey: Companies were selected and contacted by use of an international internet panel At the beginning of the interview, a screening for the appropriate contact and for quota control was conducted Telephone surveys: Companies were selected and contacted by telephone. At the beginning of the interview, a screening for the appropriate contact and for quota control was conducted Telephone surveys were only conducted for Slovakia and partly for Hungary. Sample n=3,971 persons were interviewed in total (approx. n= persons per country) In each country, a quota was maintained according to three rough industry categories and four classes of company size. Interview Web-assisted personal interviews (WAPI) of approx. 12 minutes duration Telephone interviews (CATI) of approx. 25 minutes duration Interview period: 21/06/ /08/2010 Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

8 1. Survey design Sample overview 1.6 Turnover overall (n = 3,971) n Micro enterprise 1,479 Small enterprise 1,105 Medium/Large enterprise 888 Large enterprise 499 Economic sector overall (n = 3,971) n Manufacturing 843 Trade/Sales/Distribution 1,096 Services 1,734 Financial services 298 Where a single answer is possible, it may be that the cumulative results are a percent more or less than 100% when adding up the response rates for any particular question. This is the consequence of rounding off the results. To provide the most exact results per response, we have chosen not to adjust the cumulative results to fit a total of 100%. Countries Manufacturing Trade/sales/ distribution Services Financial Services Australia Austria Belgium Canada China Czech Republic Denmark France Germany Great Britain Hong Kong Hungary Ireland Italy Mexico Netherlands Poland Slovakia Spain Sweden Switzerland USA Total Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

9 2. Executive summary Introduction 2.1 This report, which is an integral part of the 8th edition of the Atradius Payment Practices Barometer, focuses on the payment behaviour of the customers of international companies, as well as on the primary aspects of trade credit supply and management at a worldwide level. The background and the objectives of this report and of the individual country reports are the same: we strive to provide companies trading internationally with an accurate understanding of the trade dynamics of the countries and world regions with which they do business, or plan to do business, as an incorrect assessment of the situation may result in serious cash flow problems. The Summer 2010 Payment Practices Barometer is available on the Atradius website at Conclusions 2.2 The economic crisis continued to impact businesses across the world in More than half of the respondents to the Payment Practices Barometer have experienced late payments without prior agreement and half of the respondents have been asked to extend their payment terms. Whether buyers were trying to take advantage of lingering recessionary sentiment from 2009 or were really still struggling to meet their payment responsibilities, the result has been that respondents across the survey scope have felt the impact of their customers actions in the form of payment delays that have frequently resulted in the need for them to take actions to ensure continued efficient responses to their own financial responsibilities. Generally respondents have been managing this through a combination of credit management practices employed both in the decision process about offering credit terms and in the credit management process following the sale. For most companies two or three credit management processes or considerations are used in conjunction, however for some of the respondents more than three factors or practices are considered when making credit management decisions. Ultimately the goal of business is to promote safe trade between all parties involved in the transaction. The responses of our survey participants highlights the challenges they are facing in achieving this goal, the impacts of the payment behaviour of their buyers and some of the measures they are taking to manage their receivables portfolios. While some cultural preferences prevail, there are opportunities for businesses across the world to learn from other markets and adapt new procedures that can improve their on-time receipt of payment for the products and services they sell on credit. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

10 2. Executive summary Core results 2.3 The main survey findings: Respondents from the 22 countries surveyed were more likely to sell on credit terms to their foreign than to their domestic customers. A preference to sell on credit terms to domestic customers, however, was reported by respondents from Germany, Austria and Switzerland. Main criteria that played a role in the decision to sell on credit terms: familiarity, track record credit check and reputation. Overall average domestic payment term: 32 days: Overall average foreign payment term : 38 days Primary determinants of payment terms: company s standard payment terms, financial stability of the buyer, bargaining power of the customer and industry standard payment terms. Main factor in the decision to differentiate payment terms: type of buyer followed by country of the buyer and industry of the buyer. In all 22 countries included in the survey, if a different procedure was used with credit sales to domestic compared to foreign customers, it was most likely to have either been higher down/advance payment (49% of respondents) or more frequent dunning (48% of respondents). when selling on credit terms to domestic customers and the use of letters of credit when selling on credit terms to foreign customers. Respondents from the countries surveyed outside Europe, however, reported having also requested higher down / advance payment when selling on credit terms to foreign customers. If an impact from overdue invoices was experienced by respondents, it was most likely to have been the need to take specific measures to correct cash flow (39% of respondents), the postponement of the company s own payments to suppliers (36%) or the pursuit of additional financing (28%). Average domestic payment duration: 33 days Average foreign payment duration: 38 days If a respondent made a change in its credit management practices over the past year, it was most likely to have been an increase in the use of dunning - outstanding invoice reminders (37% of the respondents in Europe and 35% overall) or in the use of credit checks (31% of the respondents in Europe and 33% overall). On average, European respondents received payments from domestic customers within 2 days of the average payment term, whereas, at the worldwide level, payments from domestic customers were received within 1 day of the average payment term. Payments from foreign customers were received within 1 day of the average payment term in Europe and, on average, at the due date at the worldwide level. Approximately 40% to 50% of the invoices of respondents in the countries surveyed were paid late. Over 50% of respondents in the countries surveyed reported that customers had delayed payment beyond payment term without prior agreement. 40% to 50% of the overall respondents were asked for extended payment terms over the last six months, whereas over 30% of overall respondents reported that customers asked for an increase in credit. Respondents from all 22 countries included in the survey reported that German customers were the best payers (an average of 20% of respondents in Europe and 17% in the rest of the world). Outside the EU, customers from the USA were identified as the best payers. Overall, the average DSO was 46 days, whereas in Europe it was 43 days. Italy stands out as the country with the highest average DSO (83 days), while the lowest DSO was observed in Germany (27 days). Over 60% of the respondents from the countries surveyed experienced no change in DSO over the past year, while 19% of respondents experienced either an increase or a decrease in DSO. On average, the increase experienced was 16 days, and the average decrease was 14 days. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

11 3. Use of trade credit Sales on credit terms 3.1 With the exception of China, which showed a preference for sales on a cash basis to both domestic and foreign customers, and of Poland, the USA and Mexico, which showed a preference for cash sales to domestic customers, respondents from all of the other countries surveyed were in general more inclined to sell on credit terms rather than on a cash basis. The survey findings revealed, in particular, a noticeable preference of the respondents to sell on credit terms to foreign rather then to domestic customers. This practice is evidenced by the difference between the foreign and domestic trade credit volumes in both Europe (67% and. 64% respectively) and in the rest of the world (64%and 60% respectively). A preference to sell on credit terms to domestic customers, however, was reported by respondents from Germany, Austria and Switzerland, whereas companies surveyed in Canada showed an equal likelihood to use trade credit in their business relationships with both their domestic and foreign customers. In terms of business sectors, respondents from the manufacturing sector expressed a greater preference for offering trade credit to customers than respondents from the other sectors surveyed. From a business size perspective, on average respondents from micro-enterprises were less inclined to sell on credit terms than respondents from both SMEs and large businesses in Europe and in the rest of the world. What percentage of your sales (domestic/foreign) are made on credit terms/cash basis? Basis: all companies surveyed Basis: interviewed companies that sell products or services abroad Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

12 3. Use of trade credit Criteria influencing the decision to sell 3.2 on credit terms In all of the countries surveyed, respondents made their decisions about selling on credit terms mainly on the basis of the following criteria: familiarity, track record, credit check and reputation. Familiarity is related to the knowledge of the customer from experience or as a result of economic, cultural or geographic proximity. For respondents from the Czech Republic this was a criteria in the decision process in most decisions to sell on credit terms (62% of respondents), and was the most influential factor for respondents from Slovakia (39%), Denmark, Switzerland and Italy (33%) and Austria (25%). From both a business sector and a company size perspective, knowledge of the customer from experience was also the factor that most influenced decisions on credit sales made by micro enterprises operating in both the manufacturing and the services sector across all the countries surveyed. Both track record and credit check provide a perspective on the buyers payment history. On average, track record had a significantly greater influence on the credit sales decision process in Germany, Switzerland and Poland than in most of the other countries surveyed. Credit check, on average, influenced respondents from Mexico, China and Sweden noticeably more than respondents from most of the other countries surveyed. From a business sector and a company size perspective, these factors had the same influence on the credit sales decisions process across all the business sectors surveyed. In terms of company size, however, track record had a greater influence on the decisions made by large enterprises, while credit check was the main influence on the decisions made by medium/large enterprises. Reputation is an intangible factor related to the perception that stakeholders have of a company from an economic/social/ethical point of view. Of the 22 countries surveyed, respondents from Spain were most influenced by this variable when deciding whether to sell on credit terms. In this respect, Spain stands out as the country whose respondents reported considering the reputation of the customer as the most influential driver in their credit sales decision process. From a business sector and a company size perspective, these factors had the same influence on the credit sales decisions process across all the business sectors surveyed, irrespective of company size. Overall, it is worth noting that the combined percentage of respondents influenced by familiarity and reputation was noticeably higher than that of respondents who reported being influenced by criteria relating to a company s actual ability to pay. This suggests that, across the world, non-financial considerations about the buyer seem to outweigh financial indications when making decisions about selling on credit terms. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

13 4. Credit management practices Average payment terms (domestic/foreign) 4.1 The highest average domestic payment term was reported in Italy (58 days), followed by the Czech Republic (46 days). The Czech Republic and Italy stand out as the countries with the highest average foreign payment term (58 days). German average domestic payment term was smallest (19 days), followed by Austria (25 days) and Australia (26 days). The average foreign payment term was also smallest in Germany (24 days), followed by Great Britain and Austria (29 days) The average domestic payment term in Europe as well as for the overall survey (32 days) was shorter than the average foreign payment term (38 days).average domestic payment term was shorter than the average foreign payment term for each individual country. Segmented by business sector worldwide, the manufacturing sector exhibited the highest average payment terms, both domestic (35 days) and foreign (41 days). The smallest average payment terms were applied in the services sector, both domestic (28 days) and foreign (33 days). Segmented by business size worldwide, large enterprises exhibited the highest average payment terms, both domestic (37 days) and foreign (42 days). Micro enterprises applied the smallest average payment terms, with an average payment term of 27 days for domestic customers and 34 days for foreign customers. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

14 4. Credit management practices What payment terms does your company set for its domestic / foreign customers? * not representative Basis: all companies surveyed Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

15 4. Credit management practices * not representative Basis: interviewed companies that sell products or services abroad. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

16 4. Credit management practices Payment terms determinants 4.2 In general, Chinese and Polish respondents were more likely to report any of the determinants to be important than were respondents in the rest of the world. In contrast, Dutch and Slovakian respondents were less inclined to report any of the determinants to be important in dictating the payment terms agreed upon. Company standard payment term was the most reported determinant of the payment terms decided on: reported by 43% of respondents worldwide and most reported in China, the Czech Republic and Australia. The second most reported determinant for payment terms was the financial stability, size and complexity of the buyer, reported by 35% of respondents worldwide. Again, the Chinese and Czech respondents reported this determinant more than those in the rest of the world. In the financial sector worldwide, the financial stability, size and complexity of the buyer (38%) was reported more frequently than company standard payment terms (35%). This may reflect the sector s experience of the recent financial crisis and the exposure of instability in financial services companies resulting from complex financial products. Thirdly, the determinants most mentioned were the industry standard payment terms and the bargaining power of the customer, both reported by 28% of respondents worldwide. Mexican and Czech respondents reported the bargaining power of the customer more often than those in other countries. Chinese respondents reported the industry standard payment terms more frequently than those in the rest of the world. In contrast, Czech respondents are least likely to take industry standard payment terms into account when deciding on payment terms. What dictates the payment terms your company sets for its customers? Basis: all companies surveyed multiple answers possible Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

17 4. Credit management practices Use of differentiated payment terms % of respondents worldwide indicated that they differentiated payment terms based on the type of buyer, while 39% of the respondents worldwide differentiated payment terms based on the country of buyer and 34% on the basis of the industry of buyer. Similar results were reported over all business sizes except for micro enterprises, which reported that they differentiated less based on all three criteria. This suggests that micro enterprises are less inclined to differentiate in general. A different result was found in the Services and Financial Services sector. These respondents differentiated more on the basis of industry rather than country, in contrast to the aggregate results of all sectors. Hong Kong alone reported differentiation more often based on country of buyer than on type of buyer. Of the other countries, Switzerland, Mexico, France and Belgium were the only ones that reported more differentiation based on industry than on country. Countries in the rest of the world all ranked type of buyer first, followed by country of buyer and industry of buyer. Respondents from China and Hong Kong reported all three differentiating factors relatively frequently compared to respondents from the rest of the world, suggesting that differentiation is more common in China and Hong Kong than in the rest of the world. The Czech respondents were the least wide ranging in their differentiating factors, with 72% reporting that they differentiated based on type of buyer and only 12% reporting that they differentiate based on the industry of buyer. Does you company differentiate payment terms based on country, industry and/or type of buyer? Basis: all companies surveyed Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

18 4.Credit management practices Early payment discounts 4.4 Worldwide, 41% of respondents reported offering discounts for early payments, and there were considerable differences between countries. China (75%), Hong Kong (66%) and Italy (57%) discounted most frequently, while Sweden (13%), Denmark (18%) and the Netherlands (24%) discounted the least. With China representing a large manufacturing sector and the Nordic countries more active in the services sector, this matches the pattern seen in business sectors. The manufacturing sector is most likely to use discounting for early payment (54%) while the services sector is least likely to discount for early payment (31%). The result for Italy may be explained by their long payment term and the consequent higher importance of discounting. In terms of business size, micro enterprises are least likely to discount payment (35%). Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

19 4.Credit management practices Credit sales procedures (domestic/foreign) 4.5 Respondents were asked if they undertook certain credit sales procedures more often with domestic or foreign customers, or equally with both. About half the respondents worldwide (51%) did not request higher advance payments from either domestic or foreign customers. Of those that did, about half (23%) requested higher advance payments from domestic customers and half requested higher advance payments from foreign customers (26%) The request for higher advance payments was reported most often by China and Hong Kong respondents. China and France required higher advance payments most often for their domestic customers, while Hong Kong and Great Britain required higher advance payments most often for their foreign customers. Hungarian and Danish respondents reported the fewest requests for higher advance payments. About half the respondents worldwide (52%) did not use more frequent dunning to either domestic or foreign customers. Of those that did, about half (24%) use more frequent dunning with domestic customers and half use more frequent dunning with foreign customers (24%) More frequent dunning was also reported most often by respondents from China and Hong Kong. Spanish respondents reported more frequent dunning most often for its domestic customers, while Chinese and Hong Kong respondents reported it most often for their foreign customers. Slovakian respondents reported the lowest use of increased dunning. 60% of the respondents worldwide use letters of credit with domestic and foreign customers equally frequently. 14% of respondents reported an increase in the use of letters of credit with their domestic customers, and 26% reported an increase with their foreign customers. An increase in the use of letters of credit was reported most often by China and Hong Kong. Spanish respondents reported an increase in the use of letters of credit most often with their domestic customers, while Chinese respondents reported an increase most often with their foreign customers. Slovakian respondents reported the fewest increases in the use of letters of credit. 63% of the respondents worldwide use mandatory credit checks with domestic and foreign customers equally frequently. 14% of the respondents reported an increase in the use of mandatory credit checks with their domestic customers, and 23% reported an increase with their foreign customers. An increase in the use of mandatory credit checks was reported most often by China and Hong Kong. Chinese and Canadian respondents reported an increase in the use of mandatory credit checks most often with their domestic customers, while respondents from China and Hong Kong reported an increase in the use of credit checks with their foreign customers. Again, Slovakian respondents reported the fewest increases in the use of mandatory credit checks. 63% of the respondents worldwide requested the current financials of domestic and foreign customers equally frequently. 17% of the respondents reported an increase in requests for current financials on their domestic customers, and 19% reported an increase in requests for current financials on their foreign customers. The request for current financials on buyers was reported most often by respondents from China and Hong Kong respondents. Chinese respondents required current financials most often on their domestic customers, while respondents from Hong Kong and Canadian required this information most often on their foreign customers. Czech respondents reported the fewest requests for current financials on buyers. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

20 4. Credit management practices What do you do differently in your credit sales with domestic buyers compared to foreign buyers? Basis: interviewed companies from Europe that sell products or services abroad Basis: all interviewed companies hat sell products or services abroad Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

21 4.Credit management practices Impact of overdue invoices 4.6 Worldwide, some of the potential impacts of overdue invoices were relatively low, and reported by fewer than a quarter of respondents. However, 39% of respondents reported taking specific measures to correct cash flow in response to overdue invoices, the postponement of the company's own payments to suppliers (36%) and the pursuit of additional financing (from bank, factors and others) (28%). It is worth noting that, as a result of overdue invoices, 59% of respondents from China and Hong Kong reported that they were forced to become non-compliant with a business loan, 49% of Chinese and 48% of Hong Kong respondents reported defaulting on a business loan, 57% of Chinese respondents reported defaulting on the their own payment to suppliers, and 66% of Chinese and 55% of Mexican respondents reported having to postpone their own payment to suppliers. 68% of Mexican and 66% of Chinese respondents also reported overdue invoices forcing them to take specific measures to correct cash flow, while 52% of respondents from Hong Kong and 51% of Chinese respondents reported being forced to pursue additional financing (from bank, factors and others). Over the past year, have overdue invoices ever caused you to..? Basis: all companies surveyed Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

22 4.Credit management practices Change in credit management practices 4.7 An increase in the use of credit checks was reported by 25% and a decrease by 3% of all respondents. Interestingly, respondents in the financial services sector reported both more increases (35%) and more decreases (7%). The most reported increases in the use of credit checks came from Chinese respondents (44%), and the most reported decreases from respondents in Poland and Hong Kong (7%). An increase in the use of dunning was reported by 35% and a decrease by 5% of respondents. Again, respondents in the financial services sector reported both more increases (35%) and more decreases (7%). The most reported increases in the use of dunning came from Spanish respondents (50%), while the most reported decreases were from respondents in Hong Kong (13%). An increase in the use of credit insurance was reported by 14% and a decrease by 5% of respondents. 24% of respondents in the financial services sector reported increases. The most reported increases in the use of credit insurance were from China (33%), and the most reported decreases from Hong Kong (10%). An increase in the use of credit reports was reported by 19% and a decrease by 5% of respondents, with respondents in the financial services sector reporting both more increases (28%) and more decreases (8%). The most reported increases in the use of credit reports were from respondents in Mexico (38%) and Ireland (34%), and the most reported decreases from Hong Kong (13%) An increase in requests for current financials on buyers was reported by 22% and a decrease by 4% of respondents. 30% of the respondents in the financial services sector reported an increase, while only 16% of micro enterprises did so. The most reported increases in the use of credit reports came from Mexico (40%), and the most reported decreases from Hong Kong (11%). An increase in self insurance was reported by 14% and a decrease by 4% of respondents. The most reported increases in the use of self insurance came from China (33%), and the most reported decreases from Hong Kong (11%). An increase in the use of letters of credit was reported by 14% and a decrease by 4% of respondents. The most reported increases in the use of credit reports came from China (33%), and the most reported decreases from Hong Kong (9%). Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

23 4. Credit management practices Over the past year, how have your credit management practices changed? Basis: all companies surveyed Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

24 5. Customers payment behaviour Average payment duration 5.1 Our survey showed the overall average domestic payment duration to be 33 days, and the average foreign payment duration to be 38 days. This pattern of a longer average foreign payment duration than the average domestic payment duration was seen across all countries surveyed except for Spain and Ireland. Both domestic and foreign average payment durations were seen to increase in direct proportion to the size of the company. When segmented by business sector, the financial sector reported relatively shorter payment durations - 28 days for domestic customers and 33 days for foreign customers - while the manufacturing sector showed relatively longer payment duration - 36 days for domestic customers and 40 days for foreign customers. Italy, Spain, the Czech Republic and Slovakia have particularly long payment durations.. Poland had both the shortest domestic average payment duration (22 days) and the shortest foreign average payment duration (25 days), as did Germany and Great Britain. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

25 5. Customers payment behaviour How many days does it take, on average, for your domestic business partners to settle their debts? * not representative Basis: interviewed companies from respective countries Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

26 5. Customers payment behaviour How many days does it take, on average, for your foreign business partners to settle their debts? * not representative Basis: interviewed companies from respective countries that sell products or services abroad Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

27 5. Customers payment behaviour Average payment delays 5.2 A comparison of the average payment durations and the average payment terms highlighted the following: Average domestic payment delays Of the countries surveyed, respondents in the Czech Republic received their payments from domestic customers the earliest (on average 5 days earlier than the average payment term). Poland followed suit with almost the same average value. Outside the EU, respondents from China and Mexico reported having received payments from their domestic customers on average 3 days earlier than the average payment term. These values are markedly below the corresponding European averages (within 2 days of the payment term) and world averages (within 1 day of the payment term). Of the other countries surveyed, respondents received their payments from domestic customers in the range from 2 days earlier than the average payment term (respondents from Canada) to an average delay of 5 days after the domestic payment term (respondents from Switzerland). At the bottom end of this range, Slovakian respondents reported receiving payments from domestic customers on average within 13 days of the average payment term. From both an industry and business size perspective, small enterprises operating in the services sector received their domestic payments later than the other companies interviewed. Average foreign payment delays Again, the Czech Republic is notably the country whose respondents received their payments from foreign customers the earliest (on average 8 days earlier than the average payment term), followed by Poland (7 days) and, outside the EU, Mexico (6 days) and China (5 days). These values are also markedly below the corresponding European averages (within 2 days of the payment term) and world averages (corresponding with the payment term). Of the other countries surveyed, respondents received their payments from foreign customers in the range from 4 days earlier than the payment term (respondents from the USA) to an average delay of 7 days (Hungary). Switzerland came at the bottom end of the range, with an average payment delay of 15 days. From both an industry and business size perspective, as with domestic payments, small enterprises operating in the services sector received their foreign payments later than the other companies interviewed. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

28 5. Customers payment behaviour * not representative Basis: all companies surveyed Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

29 5. Customers payment behaviour * not representative Basis: interviewed companies that sell products or services abroad Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

30 5. Customers payment behaviour Payment timing 5.3 Payment customs may vary from country to country. In particular, what is considered a little late in one country may be considered very late in another. To accommodate these differences, timing bands have been used. Timing band 1 - Of the countries surveyed, Sweden and Denmark stand out as the countries with the highest percentage of invoices both domestic and foreign paid on time over the last six months (77% and 75% respectively). In the rest of the countries surveyed, an average of over 40% of the invoices were paid late. The highest percentage of invoices paid late was registered in Ireland and China (around 50% in both countries). It is worth noting, however, that Slovakia had the highest percentage of invoices paid more than one month late over the last six months. Timing band 2 - In the Netherlands and Australia, 36% and 33% respectively of both domestic and foreign invoices were paid late. The percentage of late paid invoices increased to 49% in the Czech Republic, while in Hong Kong it amounted to 59% (in particular, Hong Kong had the highest percentage of invoices 15% - more than one month late). Timing band 3 - Of the 4 surveyed countries falling into the same timing bands of invoices payment, Poland stands out as having the lowest percentage of invoices paid late (29%). This percentage of late paid invoices increased to 39% in the case of Mexico. On average, over 40% of the invoices in Spain and Italy (41% and 47% respectively) were paid late. Italy had the highest percentage of invoices which were paid more than two months late. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

31 5. Customers payment behaviour Evaluation of customers payment behaviour 5.4 Of all the countries surveyed, the Czech Republic had the highest percentage of respondents (77%) reporting that, over the last six months, customers had delayed payment of invoices beyond payment term without prior agreement. Hungary and Slovakia followed with 64% and 63% respectively. Responses from Sweden were at the bottom end of the range, with only 38% of Swedish respondents reporting delayed payment from customers without prior agreement. China and Hong Kong top the list of countries surveyed, with 81% and 77% of respondents respectively who received a request for extended payment terms. However, only 32% of German respondents had received a request for extended payment terms from customers over the last six months. China again tops the list of countries whose respondents were asked for an increase in credit (66%), followed by Mexico (56%). In contrast, the Czech Republic had the lowest percentage of respondents (8%) who had received a request for an increase in credit over the last six months. Extent to which, in the last six months, your customers Basis: all companies surveyed Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

32 5. Customers payment behaviour Evaluation of business relationships 5.5 with foreign customers When asked to rate their business relationships with the customers operating in the countries they export to, respondents from all 22 countries surveyed reported that German customers were the best payers (an average of 20% of respondents in Europe and 17% in the rest of the world). Outside the EU, customers from the USA were identified as best payers. Average Days Sales Outstanding (DSO) 5.6 Of the countries surveyed, Italy had the highest average DSO (83 days), followed by China (74 days), and the USA (61 days). These values were noticeably higher than the average DSO in both Europe (43 days) and the world (46 days). The lowest DSO values of the overall survey were seen in Germany (27 days) and in Austria (28 days). In all of the countries surveyed, the majority of the respondents (over 60%) experienced no change in DSO over the past year. If a change was experienced, it was more likely to have been an increase in DSO (experienced on average by almost 20% of the survey respondents in both Europe and the rest of the world). Expressed in average days, this increase amounted to 16 days. However, a higher percentage of respondents from the USA (29%), Great Britain (23%), France (21%), Canada (16%) and Sweden (8%) experienced a decrease rather than an increase in DSO, the average decrease for the overall survey amounting to 14 days. Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

33 6. Appendix Appendix 6 Appendix to 4.3 Use of differentiated payment terms Does the company differentiate payment terms based on the country of buyer? Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

34 6. Appendix Does the company differentiate payment terms based on industry of buyer? Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

35 6. Appendix Does the company differentiate payment terms based on type of buyer? Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

36 6. Appendix Appendix to 4.6 Impact of overdue invoices...become non-compliant with your loan covenants Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

37 6. Appendix...default on a business loan Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

38 6. Appendix...default on your own payments to suppliers Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

39 6. Appendix...postpone your own payments to suppliers Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

40 6. Appendix...take specific measures to correct cash flow Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

41 6. Appendix...pursue additional financing Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

42 6. Appendix Appendix to 4.7 Change in credit management practices Amount of down/advance payment Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

43 6. Appendix Use of credit checks Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

44 6. Appendix Dunning Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

45 6. Appendix Amount and use of credit insurance Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

46 6. Appendix Use of credit reports Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

47 6. Appendix Requests for current financials on buyers Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

48 6. Appendix Self insurance Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

49 6. Appendix Use of letters of credit Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

50 6. Appendix Length of payment terms Basis: all interviewed companies Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer

51 7. Your contacts at Atradius Your contacts at Atradius 7 The Netherlands (Head office) Christine Gerryn Director David Ricardostraat 1 Corporate Communications and Marketing 1066 JS Amsterdam Phone: corporate.communications@atradius.com christine.gerryn@atradius.com John Blackwell Head Office Phone: john.blackwell@atradius.com Andrea Riedle Head Office Phone: andrea.riedle@atradius.com Carlinda Lengkeek The Netherlands Phone: carlinda.lengkeek@atradius.com Australia Denise Hung Oceania Level 5, Export House Phone: Pitt Street denise.hung@atradius.com Sydney NSW 2000 Belgium Claudine Defrance Belgium, Luxembourg Avenue Prince de Liège Phone: Namur claudine.defrance@atradius.com Denmark Thomas Irving Pedersen Nordics Sluseholmen 8-A Phone: Copenhagen thomasirving.pedersen@atradius.com France Fabienne Allainguillaume France 44, Avenue George Pompidou Phone: Levallois Perret Cedex, Paris fabienne.allainguillaume@atradius.com Germany Andrea Köhnen Germany, Central and Eastern Europe Opladener Strasse 14 Phone: Cologne andrea.koehen@atradius.com Italy Silvia Ungaro Italy Via Crescenzio 12 Phone: Rome silvia.ungaro@atradius.com Spain Pavel Gómez del Castillo Recio Spain, Portugal, Brazil Paseo de la Castellana n 4 Phone: Madrid pgomezre@creditoycaucion.es United Kingdom Joanne Aaron UK and Ireland 3 Harbour Drive Phone: Capital Waterside joanne.aaron@atradius.com Cardiff CF10 4WZ USA Kathy Farley - USA, Mexico, Canada 230 Schilling Circle Phone: Suite kathy.farley@atradius.com Hunt Valley, MD Crédito y Caución. Payment Practices Barometer Survey of payment behaviour of international companies Summer