B2B payment defaults on the rise in Asia-Pacific

A survey conducted by Atradius has found that businesses in Asia-Pacific have experienced a significant rise in ‘uncollectable’ payments on trade debt. The 3.6 percent figure in 2011 has increased to five percent in 2012. The latest Atradius Payment Practices Barometer, which focuses on Asia-Pacific, found that over half of the respondents also planned to increase measures to protect their businesses against deterioration of trade credit risk.

The November 2012 Atradius Payment Practices Barometer polled 1,661 businesses in Australia, China, Hong Kong, India, Indonesia, Japan, Singapore and Taiwan. On average, 30 percent of the total value of domestic and foreign B2B invoices issued by survey respondents remained unpaid at the due date. The highest percentage of overdue B2B invoices was approximately 35 percent in Hong Kong and the lowest fewer than 20 percent in Japan.

In addition, over 10 percent of invoices remained unpaid after three months overdue and over five percent of B2B receivables were defaulted upon. This percentage reached a high of seven percent in India and Singapore, and a low of around two percent in Japan. The impact of the significant levels of late payment is evidenced by the variance between the average payment term recorded in Asia-Pacific (32 days) and the average Days Sales Outstanding of 44 days.

Domestic payment delays due to liquidity restraints have also risen to 53.5 percent from 47.7 percent in 2011. Indonesian businesses are experiencing the toughest time, with 70 percent experiencing problems with domestic payments owed to them, whilst payments from foreign customers were mostly delayed because of the complexity of the payment procedure or inefficiencies of the banking system – around 45 percent of respondents in each case.

To reduce payment delays and payment defaults, over half of the survey respondents (53 percent) anticipate checking buyers’ creditworthiness more often, particularly respondents in Singapore (68.0 percent) and China (64.5 percent).

Alun Sweeney, Regional Director of Atradius UK & Ireland says with little or no growth in many primary European export destinations, export-orientated economies across Asia-Pacific will find stable growth challenging in 2013: “Specifically, only Ireland, Austria and Germany are forecast growth of one percent or more next year, whilst insolvencies are forecast to improve only in US, Japan, Norway and Canada.”