Atradius Payment Practices Barometer 2018

Sydney, Australia – Australian businesses continue to trade on credit in a relatively-benign risk environment but credit terms are stretching out which could create some risk of cash flow impacts, according to new research by trade credit insurance provider, Atradius.

Atradius surveyed 205 Australian companies to gather insights on international corporate payment practices.

Against a backdrop of economic and political risks to global trade growth, and despite the current more benign insolvency environment, the average proportion of sales made on credit in Australia remained unchanged at 43.8 per cent. Sales on credit terms occur significantly more with domestic business-to-business (B2B) customers than with B2B customers abroad (50 per cent compared to 37.5 per cent).

Mark Hoppe, managing director, Australia and New Zealand, Atradius, said, “Australian businesses are granting trade credit to domestic and foreign B2B customers because this is their usual business practice. Selling on credit is also seen as a way to ensure cash flow and expand businesses domestically and internationally.

“However, organisations need to remain cautious when granting credit terms to foreign customers, with over a third of respondents stating they would not authorise credit terms if there’s a high currency risk (39.3 per cent) or high economic or political risk in the customer’s country (35.7 per cent).”

The barometer also showed Australia has the second lowest percentage of respondents reporting late payments by their B2B customers (83.2 per cent). However, unlike in other Asia Pacific countries surveyed, the proportion of foreign past-due B2B invoices is significantly higher than that of domestic past due B2B invoices. The report also found a steep increase in the average days sales outstanding (DSO) figure to 34 days, which is 12 days longer than in 2017.

Payment terms given to both domestic and foreign B2B customers have increased significantly. Domestic B2B customers are given, on average, 25 days to settle their invoices which is five days longer than in 2017. Foreign B2B customers are given, on average, 28 days to fulfil their payment obligations, 11 days longer than in 2017.

Payment duration in Australia increased to 47 days in 2018, which is two days longer than in 2017 but significantly below the regional average of 57 days. Payment delays by B2B customers seem to occur mostly because of insufficient availability of funds and the buyers using outstanding invoices as a form of financing, stated by 41 per cent of respondents.

Insufficient availability of funds was also the main reason for payment delays by foreign B2B customers, mentioned by 32.3 per cent of respondents. Disputes over the quality of goods delivered and services provided was another frequently mentioned reason for foreign payment delays, citied by 30.7 per cent of respondents.

After Japan, Australia has the second lowest average proportion of uncollected receivables in Asia Pacific. Uncollected receivables originated most often from B2B customers in construction, consumer durables, business services and services. The customer going bankrupt or out of business was the main reason for write-offs in Australia mentioned by 46.3 per cent of respondents and in Asia Pacific overall. The second most frequently reported reason for write-offs is the inability to locate the customers, stated by 31.7 per cent of respondents.

Mark Hoppe said, “Australian businesses are generally seeing consistent payments from customers although it would be beneficial to reduce the payment duration. With many customers holding onto payments as a form of financing, businesses could consider offering more attractive discounts for early or on-time payments.

“When customers aren’t paying because of insufficient funds, businesses should reconsider their relationships with those companies. It could be an indicator that these companies aren’t trading in a viable way, so terminating the relationship could protect the business from the ramifications if these customers become insolvent.

“Trade credit insurance is a reliable way to protect organisations from late or non-payment, and can also help businesses conduct thorough due diligence so they have a clearer picture of which companies are more risky to do business with.”

About Atradius

Atradius is a global provider of credit insurance, surety and collection services, with a strategic presence in over 50 countries. The credit insurance, bond and collection products offered by Atradius protect companies around the world against the default risks associated with selling 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. You can find more information online at https://atradius.com.au/

Atradius appoints Farook Mohammed as New Zealand country manager

Sydney, Australia – Atradius has announced the appointment of Farook Mohammed as country manager in New Zealand following the retirement of Martin Jones. Specialising in the assessment and management of clients’ needs and management of risks, Farook joins Atradius as part of its ongoing efforts to support local and international businesses in their exports as well as in their trade with local companies.

Farook has more than 15 years’ experience in credit insurance as an underwriter and broker. He joins Atradius from Aon Risk Services Australia, where as a client manager, he was responsible for the service, placement, and administration of a large portfolio of trade credit insurance clients ranging from small- to medium-sized enterprises (SMEs) to large global corporations.

Farook also previously worked as an underwriting manager at QBE Insurance Australia, where he managed 50 per cent of QBE Trade Credit Australia’s domestic retention portfolio and all export retention and new business in New South Wales.

Mark Hoppe, managing director, Australia and New Zealand, Atradius, said, “Martin Jones has contributed significantly to the growth of Atradius in New Zealand and we wish him well in his retirement. Farook is a highly capable replacement, bringing a wealth of experience and expertise to the company. We look forward to working with him to continue helping New Zealand businesses trade with confidence.

Farook Mohammed, country manager, New Zealand, Atradius, said, “I am excited to join Atradius, one of the leading credit insurers in the region. I’m looking forward to building strong relationships with our customers and their brokers.”

The New Zealand office of Atradius will relocate from its longstanding Wellington headquarters to Auckland in December.

About Atradius

Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in more than 50 countries. Atradius has access to credit information on over 240 million companies worldwide. Its credit insurance, bonding and collections products help protect companies throughout the world from payment risks associated with selling products and services on trade credit. Atradius forms part of Grupo Catalana Occidente (GCO.MC), one of the leading insurers in Spain and worldwide in credit insurance.

Atradius Payment Practices Barometer 2017 reports an increase in late payments from B2B customers

Altradius LogoSydney, Australia – Australian suppliers interviewed for the October 2017 edition of the Atradius Payment Practices Barometer for Asia Pacific experienced an increase in the number of late payments from their B2B customers over the past year. To protect their businesses from late payments, 22.9 per cent of the suppliers surveyed reported having taken specific measures to correct cash flow.

In 2017, Australia’s GDP growth is not expected to exceed the 2016 rate of 2.5 per cent. A slightly more optimistic outlook is foreseen for 2018 with growth expected to accelerate to 2.8 per cent.

Despite Australia’s stable performance, there were fewer sales on credit terms compared to one year ago. The average total value of sales made on credit terms in Australia decreased from 49.1 per cent in 2016 to 43.8 per cent this year, mainly due to the sharp decrease in the average percentage of foreign B2B sales on credit. Among the Asia Pacific countries surveyed, Australia has the second lowest average percentage of transactions on credit after that of China at 40.7 per cent.

In 2017, respondents in Australia reported late payments from their domestic and foreign B2B customers more frequently than one year ago. Compared to their peers in Asia Pacific at 89.2 per cent, slightly fewer respondents in Australia at 88.1 per cent reported late payments from their B2B customers in 2017. However, the percentage of Australian respondents reporting domestic and foreign late payments in 2017 has increased compared to 2016 when it stood at 84.0 per cent.

Payment duration in Australia improved from an average of 50 days in 2016 to 46 days in 2017. This is also the shortest credit to cash turnaround in the Asia Pacific region this year, with the regional average being 55 days.

The most frequently reported reason for payment delays in Australia was buyers using outstanding invoices as a form of financing. This is different than in Asia Pacific overall, where the key payment delay factor reported is insufficient availability of funds. 34.3 per cent of respondents in Australia cited buyers using outstanding invoices as a form of financing as the main reason for domestic payment delays.

With China as a main trading partner, respondents in Australia seem to be most concerned about risks stemming from the slowdown in Asia as compared to risks stemming from Brexit and US protectionism. 33.8 per cent of respondents stated that they will increase creditworthiness checks on their buyers and 29.6 per cent that they will increase monitoring of their buyers’ credit risk.

Mark Hoppe, managing director, ANZ, Atradius said, “In 2018, global GDP growth is expected to expand 3.0 per cent. Despite this positive outlook for the global economy, it is essential to highlight that rising protectionism, monetary tightening, and the ongoing slowdown and rebalancing of China’s economy may increase the uncertainty that businesses face. This could further cloud the global insolvency outlook, weakening business confidence, investment and consumer spending. With this in mind, the main focus of any business should be on protection of cash flow.

“Despite the challenging insolvency outlook for Asia, Atradius is actively working with its clients to address any cash flow concerns and together with our partner Atradius Collections we feel confident to provide a holistic solution even in an event of payment default.”

The total value of B2B receivables written off as uncollectable in Australia at 1.6 per cent is far under the regional average of 2.1 per cent. The main reasons why B2B receivables were uncollectable were the customer going bankrupt or out of business at 37.5 per cent, the inability to locate the customer at 32.7 per cent and the old age of the debt at 37.9 per cent.

Looking ahead, more respondents in Australia seem to expect a slight deterioration than an improvement in the payment behaviour of their B2B customers over the coming 12 months.

The Atradius Payment Practices Barometer for Asia Pacific gives insights into the key factors for customer payment delay, the challenges to business profitability, and the respondents’ opinion on payment practice trends by industry in the next 12 months.

The complete report highlighting the survey findings of the 2016 Atradius Payment Practices Barometer for Asia Pacific can be found in the Publications section of the www.atradius.com.au website.

About Atradius

Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in more than 50 countries. Atradius has access to credit information on over 240 million companies worldwide. Its credit insurance, bonding and collections products help protect companies throughout the world from payment risks associated with selling products and services on trade credit. Atradius forms part of Grupo Catalana Occidente (GCO.MC), one of the leading insurers in credit insurance both in Spain and the rest of the world. www.atradius.com.au

Atradius unveils Atrium; its new online credit management portal

Altradius LogoCredit limits approved in minutes with just a few clicks

Sydney, Australia – Atradius has announced an upgrade to its digital platform with the unveiling of ‘Atrium’, its new credit management portal. Atrium is an advanced way for business to complete credit insurance transactions creating a new level of service. The Oracle based portal is designed to evolve with digital advancements and user requirements. It is being launched between June 19 and July 15 in Atradius markets around the world.

Atrium has been designed to directly and quickly address the everyday needs of its customers, brokers, agents and account management teams. The buyer centric platform delivers a faster and more efficient user experience focused on applying for cover and filing claims; the services most frequently used by customers. Each Atradius customer can immediately and instantly search for and view information about buyers’ creditworthiness, such as buyer ratings, current cover and claims,. Having received a clear picture of the buyer on the buyer details page the customer can directly on this page apply for a credit limit with most required information already included in the application. Credit limit decisions, in most cases, are immediate.

Andreas Tesch Chief Market Officer of Atradius commented, “I am delighted with the launch of our new Atrium customer portal. This new approach and technology is a tremendous timesaver for all and reduces the possibility of errors. Its design enables our customers to constantly monitor and smoothly interact with their buyers and with Atradius. It supports better risk management and growth potential with a clear insight on safer trade for them. In a nutshell, Atrium is a more efficient, user friendly service platform that simplifies a number of account activities and reduces the risk of suffering losses caused by payment defaults. Our customers can essentially check a buyer’s creditworthiness during a deal negotiation and have cover approved before the end of the meeting.”

More features will be rolled out over the course of the year. In addition to direct access to buyer information and the ability to directly and immediately apply for and receive cover, anticipated benefits for customers include detailed portfolio overviews highlighting trends and events that may impact the policy, direct access to other information relevant to the users business and claims filing in just a couple of clicks.

The specific needs of brokers and agents are also being built into the Atrium tool. This new portal will provide a clear dedicated overview and information to manage multiple policies and customer portfolios.

About Atradius

Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in more than 50 countries. Atradius has access to credit information on over 240 million companies worldwide. Its credit insurance, bonding and collections products help protect companies throughout the world from payment risks associated with selling products and services on trade credit. Atradius forms part of Grupo Catalana Occidente (GCO.MC), one of the leading insurers in Spain and worldwide in credit insurance.

Atradius sees outlook for trade worsening

Altradius LogoSydney, Australia – After a very low pace of growth in 2015, global trade growth has slowed even further over the first half of 2016, according to Atradius Credit Insurance N.V.

Trade growth in Emerging Asia, the world’s second largest trade bloc, is extremely low, as China rebalances from investment-driven growth toward a more inward-looking consumption-led growth.

Lower commodity prices have also dampened investment in natural resource-rich economies around the world which has contributed to a sharp contraction of trade in Eastern Europe and slowdown in Latin America. Even the US has seen its trade growth grind to a halt, due to lower investment in the oil and gas sector, but also because of lower external demand and a strong USD which have reduced exports.

In 2016, the tempo of growth in world trade is expected to be about one-third of global GDP growth. Such a low rate of trade growth has not occurred since the global economic crisis of 2009.

Anti-globalisation sentiment is rising, as is evidenced by political developments like Brexit and the election of Donald Trump as US president. Trade liberalisation efforts like TPP and TTIP are stalling, thereby threatening the outlook for trade.

Subdued global GDP growth already motivates a subdued global insolvency outlook, but muted trade growth could put upward pressure on insolvencies in countries that are dependent on trade. Brexit-related uncertainty is expected to increase corporate bankruptcies in economies with a heavy focus on exporting to the UK. Protectionist measures in the US could have the same effect on economies with high trade ties to the US, especially those in Latin America.

“Matters for trade are made far worse by political developments,” said John Lorié, global chief economist at Atradius, “These are flatly trade-unfriendly, as signalled not only by the Brexit vote in the UK, but also by the stalling of the regional trade liberalization efforts. Anti-trade rhetoric by US president-elect Donald Trump make matters even worse. These developments are likely to weigh on future trade data.”

Read more about the global economic environment and gain insights into prospects and risks based on the main regions in our November Atradius Economic Outlook.

About Atradius
Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in 50 countries. Atradius has access to credit information on 200 million companies worldwide. Its credit insurance, bonding and collections products help protect companies throughout the world from payment risks associated with selling products and services on trade credit. Atradius forms part of Grupo Catalana Occidente (GCO.MC), one of the leading insurers in Spain and worldwide in credit insurance.

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