Asia has seen more payment delays while the problem is expected to stay next year, said Atradius recently.
According to the company’s 2020 Atradius Payment Practics Barometer (PPB) survey in Asia, delays in payments are largely being financed by suppliers as the use of trade credit in most markets surveyed, and along with it, payment delays, have climbed.
This survey was carried out in March 2020 in China, Hong Kong, India, Indonesia, Singapore, Taiwan, and the United Arab Emirates (UAE), according to the company.
Compared to last year’s survey, in four of the markets surveyed, credit-based sales grew by an average of 14% while at the same time the percentage of overdue invoices increased by an average of 56%.
In India and Singapore where credit sales fell, overdue invoices still surged by 69% and 29% respectively. India’s decline in credit use might even be the result of its dramatic rise in overdues.
“With the global economy dipping into recession payment default risks are growing. We expect bad debts and insolvencies to continue rising into 2021,” said Andreas Tesch, Chief Market Officer of Atradius. “Suppliers need to manage reduced demand and financial stress. Minimising these burdens with thorough credit worthiness assessments and ensuring adequate financial sustainability will be key to survival for many of these businesses.”
Although the Atradius PPB survey indicates a varied approach to trade credit across the region with marked differences between markets, it also reveals a consistent commitment to credit control, the company said.
Without exception, businesses in every market expressed their dedication to credit management processes, with many seeking to increase their focus on minimising risk, the company added.
Most of the businesses surveyed across Asia expressed optimism that government support or bank finance would be available to help support their industries and the economy, Tesch noted.
While this may be true to a certain extent, the results of the PPB survey indicate that many buyers rely on trade credit from their suppliers to finance their operations, and extend that even more by delaying payment of invoices, Altradius observed.