Australian suppliers have experienced an increase in the number of late payments from their B2B customers over the past year, according to a new survey.
The October 2017 edition of the Atradius Payment Practices Barometer for Asia Pacific found 22.9 percent of the suppliers surveyed had to take specific measures to correct cash flow to protect their businesses from late payments.
Australia’s GDP growth this year is not expected to exceed last year’s rate of 2.5 per cent. A slightly more optimistic outlook is foreseen for 2018, with growth expected to accelerate to 2.8 per cent.
Despite Australia’s stable performance, there were fewer sales on credit terms compared to one year ago, the report found.
The average total value of sales made on credit terms in Australia decreased from 49.1 per cent in 2016 to 43.8 per cent this year, mainly due to the sharp decrease in the average percentage of foreign B2B sales on credit.
Among the Asia Pacific countries surveyed, Australia has the second lowest average percentage of transactions on credit after that of China at 40.7 per cent.
Respondents in Australia this year reported late payments from their domestic and foreign B2B customers more frequently than one year ago.
Compared to their peers in Asia Pacific at 89.2 per cent, slightly fewer respondents in Australia at 88.1 per cent reported late payments from their B2B customers in 2017.
However, the percentage of Australian respondents reporting domestic and foreign late payments in 2017 has increased compared to 2016 when it stood at 84.0 per cent.
Reason for payment delays
Payment duration in Australia improved from an average of 50 days in 2016 to 46 days in 2017. This is also the shortest credit to cash turnaround in the Asia Pacific region this year, with the regional average being 55 days.
The most frequently reported reason for payment delays in Australia was buyers using outstanding invoices as a form of financing. This is different than in Asia Pacific overall, where the key payment delay factor reported is insufficient availability of funds.
And 34.3 per cent of respondents in Australia cited buyers using outstanding invoices as a form of financing as the main reason for domestic payment delays.
With China as a main trading partner, respondents in Australia seem to be most concerned about risks stemming from the slowdown in Asia as compared to risks stemming from Brexit and US protectionism.
Of those surveyed, 33.8 per cent said they will increase creditworthiness checks on their buyers and 29.6 per cent that they will increase monitoring of their buyers’ credit risk.
Uncertainty may increase
Mark Hoppe, managing director, ANZ, Atradius said: “In 2018, global GDP growth is expected to expand 3.0 per cent. Despite this positive outlook for the global economy, it is essential to highlight that rising protectionism, monetary tightening, and the ongoing slowdown and rebalancing of China’s economy may increase the uncertainty that businesses face.
“This could further cloud the global insolvency outlook, weakening business confidence, investment and consumer spending. With this in mind, the main focus of any business should be on protection of cash flow.”
Mr Hoppe said despite the challenging insolvency outlook for Asia, Atradius is actively working with its clients to address any cash flow concerns.
“Together with our partner Atradius Collections we feel confident to provide a holistic solution even in an event of payment default.”
Going bankrupt or out of business
The total value of B2B receivables written off as uncollectable in Australia at 1.6 per cent is far under the regional average of 2.1 per cent. The main reasons why B2B receivables were uncollectable were the customer going bankrupt or out of business at 37.5 per cent, the inability to locate the customer at 32.7 per cent and the old age of the debt at 37.9 per cent.
Looking ahead, more respondents in Australia seem to expect a slight deterioration than an improvement in the payment behaviour of their B2B customers over the coming 12 months.
The Atradius Payment Practices Barometer for Asia Pacific gives insights into the key factors for customer payment delay, the challenges to business profitability, and the respondents’ opinion on payment practice trends by industry in the next 12 months.
The complete report highlighting the survey findings of the 2017 Atradius Payment Practices Barometer for Asia Pacific can be found in the Publications section of the www.atradius.com.au website.