The number of overdue payments has increased by as much as three-quarters during the coronavirus crisis. Dutch companies are increasingly willing to offer longer payment terms to mainly domestic customers. Currently, 56 percent of invoices are overdue compared to 32 percent in the same period last year. This corresponds to a 75% increase. The Netherlands ranks highest among all European countries in the increase in the number of days an invoice remains unpaid on average. This is according to the Payment Barometer for Western Europe, in which credit insurer Atradius examined the payment behavior of 2,603 companies in 13 countries.
“In addition to the increase in the number of overdue payments, we also see that many companies have taken measures to manage their cash flows. It is also noteworthy that entrepreneurs choose to extend their payment terms, even though legislation is forthcoming to shorten them,” says Edwin Kuhlman, head of acceptance at Atradius Netherlands.
Longer Payment Terms
Despite the sharp increase in the number of overdue payments, almost half of the companies are willing to grant customers longer payment terms than before the pandemic. The payment term increased by 21 days during the pandemic compared to the same period in 2019. “An important reason for these extended payment terms is again the coronavirus crisis,” says Kuhlman. “By offering more trade credit, companies hope to increase their competitiveness and boost sales. Additionally, a significant portion of companies reported extending credit to support their customers with short-term financing.”
Preventing Liquidity Problems
As a result of deteriorating payment behavior, many companies have taken measures to prevent liquidity problems. Nearly 4 in 10 companies delayed payments to their own suppliers, compared to just over a third of companies in the rest of Western Europe. Additionally, 30% of Dutch companies felt compelled to lay off employees, and 3 in 10 companies applied for additional financing.
Self-Insurance as a Credit Management Tool
Kuhlman: “The Netherlands has the highest percentage of respondents (68%) using self-insurance as a credit management tool to manage payment risks, and the second highest percentage (60%) using cash sales to ensure payment. Credit insurance is used by 49% of respondents, making it the sixth most used credit management tool. In Western Europe, this percentage is 50%, making it the third most used. In response to the question of which tool respondents expect to use the most in the coming months, this percentage drops to 47% for Western Europe, while it rises to 58% in the Netherlands, making it the second most used tool after self-insurance. Finally, 45% of Dutch respondents indicated that since the beginning of the pandemic, they have started gathering direct information from customers to assess their creditworthiness, using this more than bank references.”
Optimism About Economic Recovery in 2021
Despite ongoing uncertainty about the crisis’s impact, nearly half of Dutch companies expect their customers’ creditworthiness to improve in 2021. Most companies are also optimistic about next year’s prospects. For example, 67% expect the Dutch economy to recover, and 45% are positive about the international economy. In the rest of Western Europe, this is true for 57% and 45% of companies, respectively. Kuhlman: “Much of this business confidence is likely due to government support measures. Although approaches and scope vary, many governments in the surveyed countries have implemented programs to support businesses. Given the expected worsening of the insolvency climate, further support will be vital for many companies next year.”
Source:
Atradius
