Around 40% of the total value of domestic and foreign B2B invoices issued by respondents of the latest edition of the Atradius Payment Practices Barometer survey for Western Europe, was defaulted on. On average, 7% remained outstanding after 90 days past due, raising the likelihood of becoming collections cases, and 1.2% was uncollectable.
Europe’s economy has a significant impact on Asian countries, particularly due to the high level of two-way trade volumes and investment flows between the two continents. The Eurozone is an important export destination for Asia and a modest economic recovery will keep demand for Asian products subdued. For instance Chinese export growth to Europe has been moderate for some years now, with an increase of 2.4% in 2013 after a decline of 4% in 2012.
In comparison with a total export growth of 7.8% in 2013 and 7.9% in 2012, export growth in 2014 was just 5.3%. With a share of exports in GDP of approximately 26%, China is expected to be affected.
Based on the European Central Bank’s data last year, total EU trade with Asia reached EUR.25 trillion, representing over one-third of total EU trade in 2013. At the same time, the EU contributed for over 28% of Asian trade, far exceeding any other trading partner including the US. Most of EU imports coming from Asia arise from China (16.6% of total EU imports), but Japan (3.4%), India (2.2%) and South Korea (2.1%) are also among its top 10 import source countries, cfoinnovation.com points out.
The Atradius survey of B2B payment practices surveyed approximately 3,000 businesses in 13 Western European countries. In addition to the payment behaviour of domestic and foreign customers, the survey looked at challenges to profitability and days sales outstanding (DSO).
The report highlights that within the still difficult business climate in many Western European countries, liquidity problems remain the primary reason for payment delays (51.4% of survey respondents in respect to domestic and 37% in respect to foreign customers). This is most often experienced by respondents in Greece (84.0% in respect to domestic and 57.1% in respect to foreign customers) and Italy (73.0% domestic and 48.3% foreign).
Nearly the same percentage of the respondents in Western Europe, who reported late invoice payment due to customers’ liquidity issues, expressed the opinion that outstanding invoices are used as a source of financing. This was noted most often in Austria (54.2% of respondents in respect to domestic and 49.2% in respect to foreign customers).
The report also notes that regardless of the reason for B2B customers delaying invoice payment, the administrative and financial costs of overdue receivables can be considerable for suppliers, and can erode business profitability. It also supports the contention of 24% of the respondents in Western Europe that cost containment will be their biggest challenge to profitability in 2015. This is of greatest concern in Switzerland, the Netherlands, France and Italy. Respondents in the UK and Ireland, in contrast, expect maintaining adequate cash flow to be their biggest challenge in 2015.
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