Aan alarming 60% surge in business-to-business (B2B) write-downs, which are expected to pose a serious threat to corporate liquidity Asia.
AMSTERDAM, June 28, 2022 /PRNewswire/ — Pursuing unpaid B2B trade debt has become a major concern for Asian companies trading in domestic and export markets. They face escalating costs to manage customer credit risk in-house to protect cash flow from disruptions caused by the current difficult economic and trading environment.
The problem becomes even more serious with long-term unpaid B2B commercial debt (more than 90 days) that is written off as uncollectible despite multiple payment attempts. In this situation, companies are struggling for additional sales, a measure that could help recoup their losses and thus avoid squeezing liquidity and jeopardizing a company’s entire future.
The astounding 60% increase in B2B (business-to-business, B2B) bad debts compared to our survey in 2021 are serious warning signs of growing strains on corporate liquidity. This is the top concern outlined by surveyed companies across 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 Payment Practices Barometer Survey for Asia.
Taiwan raised the highest alarm with write-offs of bad debts nearly three times higher than in our last market survey – now at 8% of total B2B invoice value. shops Hong Kong and Singapore also said they were hit hard by increased depreciation, with both posting an average increase of 50%. Another country suffered Indonesiawith a reported 40% increase in depreciation. Vietnam was included in the survey for the first time, and companies there reported that liquidity was impacted by both write-offs (at 6% of total B2B invoice value) and unpaid B2B trade debt, which accounts for about half of B2B trade value made out .
Another concern for companies in the current challenging economic and commercial environment is the difficulty of recovering profits when they are experiencing the high impact of depreciation. The Atradius survey in Asia shows that 20% more companies than in the previous year report an increased willingness to lend to B2B customers. This is a signal that current market conditions are very competitive and companies are struggling to generate the additional sales revenue that would offset write-off losses. The survey also revealed that the ability to keep up with demand (33%) as well as the resilience of demand from B2B customers (25%) is a serious concern for businesses in the coming months.
All of this has led to an increased awareness of the importance of strategic credit risk management in B2B trade among most of the companies surveyed, with one in two companies across all markets surveyed expressing an interest in insuring B2B trade receivables to mitigate the impact of customer credit risk on the business reduce business.
Andreas TeschAtradius Chief Market Officer, commented: “The growth prospects in Asia remains relatively robust both this year and in 2023 at around 5%. However, many of the region’s companies are operating globally during the current extremely turbulent period, in which the ongoing impact of the pandemic and geopolitical upheaval have resulted in a downward revision of the outlook for global growth to just over 3%. company Asia feel the pinch of this widespread disruption in the global trading arena. Increasing bad debt write-offs can be a warning sign of a business environment that is under financial pressure. This certainly explains why the need for strong strategic credit management was seen as a key theme throughout our survey across the region’s major economies.”
Roeland PuntAtradius Regional Sales Director for Asiaadded: “Given the ongoing uncertainty in the market, we do not expect the bad debt trend to recover quickly. Concerns about the length of time it takes businesses to collect overdue payments from B2B customers remain acute. Corporate credit management processes will be put to the test, and those companies that take a flexible and holistic approach to the problem will be better able to navigate the choppy waters that may lie ahead.”
The Atradius Payment Practices Barometer for Asia Pacific – June 2022 The output can be downloaded from the Atradius website on the Atradius Group website (Publications section). It also provides an in-depth analysis of how companies in key Asia Pacific markets manage the risk of non-payment associated with selling on credit to B2B customers. Topics covered include: payment terms, the time it takes to collect invoices, managing late payments, the impact of late payments on the business, and expected business developments.
About Atradius: Atradius is a global provider of credit insurance, surety and collections services with a strategic presence in over 50 countries. Atradius’ credit insurance, surety and collections products protect businesses worldwide from 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 Spain and one of the largest credit insurers in the world. Further information can be found online at https://group.atradius.com.
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