AAn alarming 60% increase in business-to-business (B2B) write-offs is expected to pose a serious threat to corporate liquidity in Asia.
AMSTERDAM, June 28, 2022 /PRNewswire/ — The pursuit of unpaid B2B trade debts has become a major headache for Asian companies operating in domestic and export markets. They face greatly increased costs to manage customer credit risk internally and thereby protect cash flow from the disruptions caused by the current challenging economic and business environment.
The problem becomes even more serious with long-term (more than 90 days) unpaid B2B trade debts that are written off as uncollectible despite multiple attempts to pay. In this situation, companies are struggling to find additional sales, a measure that could help offset their losses and thus avoid putting pressure on liquidity and jeopardizing a company’s entire future.
Serious warning signs of growing pressure on corporate liquidity are evident in the staggering 60% increase in business-to-business (B2B) bad debts that could not be collected, compared to our survey in 2021. This is the main concern expressed by companies surveyed in seven markets in Asia (China, hong kong, India, Indonesia, Singapore, Taiwanand Vietnam) and in the United Arab Emirates for the 2022 edition of the Atradius barometer of payment practices for Asia.
Taiwan sounded the highest alarm, with a bad debt write-off figure nearly three times higher than that found in our previous market survey – now at 8% of total B2B invoice value. Companies in hong kong and Singapore also said they were hit hard by the rise in radiation, with both recording an average increase of 50%. Another country that suffered was Indonesiawith a reported 40% increase in radiation. Vietnam was included in the survey for the first time and companies there said liquidity was impacted by both write-offs (at 6% of total B2B invoice value) and unpaid B2B trade debts, which affected about half of the B2B business value.
Another concern for businesses in the current difficult economic and business circumstances is the difficulty of recouping profits when experiencing a high impact from depreciation. The Atradius survey in Asia reveals that 20% more companies than the previous year reported an increased willingness to extend credit to B2B customers. This is a signal that current market conditions are very competitive and companies are struggling to secure the additional sales revenue that would offset write-off losses. The survey also revealed that a serious concern for businesses in the coming months is the ability to keep pace with demand (33%) as well as the resilience of B2B customer demand (25%).
All of this has led to increased awareness among most companies surveyed of the importance of strategic credit risk management in B2B trade, with one in two companies in surveyed markets expressing interest in insuring B2B trade receivables. to mitigate the impact of customer credit risk on the business.
Andreas TeschChief Market Officer of Atradius, said: “The growth prospects of Asia remains relatively robust at around 5% this year and in 2023. But many companies in the region are operating across the world in the current deeply unstable times, where the continued impact of the pandemic and geopolitical upheavals have prompted an upward revision. global growth outlook down to just over 3%. Companies in Asia are feeling the effects of this widespread disruption of the global trading arena. Dealing with rising bad debt write-offs can be a warning sign of a financially stressed business environment. This certainly explains why the need for strong strategic credit management was seen as a crucial theme throughout our survey in the major economies of the region. »
Roeland PuntAtradius Regional Sales Manager for Asiaadded: “Given the continued uncertainty in the market, we do not expect the bad debt trend to recover quickly. Concern over the longer time it takes for businesses to collect payments B2B customer pain remains acute. will be tested, and companies that take a flexible and holistic approach to the issue will be better placed to navigate the troubled waters that may lie ahead.”
The Atradius barometer of payment practices for Asia Pacific – June 2022 edition can be downloaded from the Atradius website on the Atradius Group website (Publications section). It further provides an in-depth analysis of how companies in key Asia-Pacific markets are managing the risk of default when selling on credit to B2B customers. Topics covered include: payment terms, invoice collection time, managing late payments, the impact of late payments on business, and expected business trends.
About Atradius: Atradius is a global provider of credit insurance, surety and collection services, with a strategic presence in more than 50 countries. The credit insurance, surety and collection products offered by Atradius protect businesses around the world against the risks of default associated with the sale of goods and services on credit. Atradius is a member of Grupo Catalana Occidente (GCO.MC), one of the largest insurers in the Spain and one of the largest credit insurers in the world. You can find more information online at https://group.atradius.com.
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