Indian B2B firms suffer most from overdue payments in Asia

Indian businesses suffer the most from delayed sales outstandings, or late payments, often delayed by as much as 80 days, in the Asia pacific region.  Worse, as much as 7 per cent of foreign invoices are written-off as being uncollectable.

Slow paying customers is also impacting the ability of suppliers in maintaining sufficient cash flow. This  is considered the biggest challenge that businesses in Asia-Pacific have had to face this year, says provider of trade credit insurance, surety and collections services worldwide, Atradius Group.

According to the Atradius Payment Practices Barometer survey, respondents' B2B customers, particularly foreign customers, took almost twice the extended payment term to pay for their credit purchases.

The November 2013 Atradius Payment Practices Barometer, a report based on feedback from 1,670 B2B suppliers of products and services in the Asia-Pacific region (Australia, China, Hong Kong, India, Indonesia, Japan, Singapore and Taiwan) highlights that 33.6 per cent of the respondents in the region considered maintaining sufficient cash flow levels to be the biggest challenge they have had to face this year. This was most  pnotable in Singapore were 36.8 per cent of the respondents shared this opinion.

As in other regions across the world, payment defaults have been more of an issue in 2013, due to slow sales growth, financing and payment defaults despite modest economic improvements, with approximately 30 per cent of the total value of B2B invoices remaining unpaid at the due date in the Asia-Pacific region, (with Singapore having about 35 per cent overdue payments).

This was a bigger problem with foreign invoices than domestic invoices. More than 5 per cent was uncollectable. (In India about 7 per cent was uncollectable). As a result of the late and unpaid invoices, there is a 26 day difference in the average 'days sales outstanding' or DSO, (56 days) and the average credit period extended to B2B customers (30 days) recorded in the Asia-Pacific region.

India recorded the highest DSO (80 days) of the countries surveyed in Asia-Pacific.  

In the 2013 survey, 'liquidity constraints' was considered the primary reason for payment delays from domestic B2B customers by 50.1 per cent of the respondents, down from 53.5 per cent in 2012. Respondents in Indonesia (63.5 per cent) experienced the most problems with late payment from domestic customers.

Among the reasons for the delay, complexity of the payment procedure was the most cited reason for payment delays by foreign B2B customers (47.8 per cent of respondents). Chinese respondents were the most impacted in this respect (61.2 per cent).

Eric den Boogert, director of Atradius Asia stated, ''Despite being somewhat insulated from the economic difficulties of Western Europe, Asia-Pacific businesses aren't completely immune. Payment default, particularly from foreign buyers, has presented as much of an issue in the region as it has in other regions across the globe. With China slowing its growth, structural reforms necessary in Indonesia, and political issues creating greater uncertainty in India, payment behaviour has weakened.''

An earlier survey of B2B suppliers of products and services in Brazil, Canada, Mexico and the US by Atradius in September, highlights that, despite modest economic improvement, generating and maintaining sufficient cash flow remains a priority. Insolvency trends, slow sales growth, financing and payment defaults all contribute to the challenge.

The Atradius Group has a presence in 45 countries, with access to credit information on 100 million companies worldwide.