Late B2B Payments Increase in China
Wednesday, December 16, 2015
According to a recent report on business-to-business payment practices in the Asia Pacific region, 62.0 percent of the businesses surveyed in China (compared to 46.3 percent in Asia Pacific) reported that domestic B2B customers have slowed invoice payment due to liquidity problems over the past year.
Late payment of invoices due to the formal insolvency of the domestic buyer was experienced by 27.3 percent of the businesses surveyed in China (compared to 21.4 percent in Asia Pacific). Moreover, the value of domestic B2B invoices more than 90 days past due of respondents from China nearly doubled over the past year (7.5 percent in 2015, up from 4.2 percent one year ago).
The longer receivables remain outstanding, the higher the likelihood that they turn into bad debts and write-offs, negatively impacting the cash flow and profitability of businesses.
The managed slowdown of China’s economy, which appears to be having a severe impact on its insolvency environment, is forecast to trigger a worsening of B2B trade credit risk in several Asia Pacific countries. According to the Atradius Payment Practices Barometer for Asia Pacific, the warning signs of these ripple effects are already there.
In Australia and Indonesia, for instance, countries whose economies are heavily dependent on commodity exports to China, the total value of B2B invoices for foreign trade that were more than 90 days overdue was significantly higher than last year. In Australia, nearly 23 percent of the value of foreign past due B2B invoices remained unpaid 90 days after the due date (up from 6.4 percent last year). This percentage is 12 percent in Indonesia (up from 4.8 percent last year).
The Atradius Payment Practices Barometer for Asia Pacific highlights that approximately 90 percent of the respondents in the region reported having experienced late invoice payment from their B2B customers over the past year. Respondents in India and Indonesia (nearly 96 percent each) experienced late invoice payments from domestic customers the most often, while respondents in Australia (95.6 percent) experienced late payments from B2B customers abroad most often.
Respondents wrote off 2.0 percent of the value of B2B receivables as uncollectable. Respondents in Hong Kong were the hardest hit by uncollectable receivables. For 54.4 percent of respondents in Asia Pacific, receivables were most often written off due to the customer being bankrupt or out of business. This was particularly the case in Indonesia (67.1 percent of respondents). This reflects the challenging business climate in which many businesses in the region still operate. Failure of the collection attempts was most often reported by respondents in Australia (nearly 51 percent).
Read the full report.