ANG SAN MEI. HONG KONG. Around 40% of the suppliers surveyed in the Asia Pacific region anticipate increasing the use of credit management tools to protect cash flow from B2B customers’ late payments over the next year. Nearly half of the suppliers surveyed in the region plan on checking their customers’ creditworthiness and payment history significantly more often over the same time frame. This reflects concern over the protection of corporate profitability, which ensures the viability of the business as well as its safe growth.
Asia Pacific frontrunner position as leader of global growth is forecast to remain unchanged in the coming years. Emerging Asia will outpace other world regions in terms of GDP growth again this year with 5.7% growth forecast. The two Asian giants, India (7.5% growth forecast this year) and China (6.6%), are expected to be in the lead. This despite the slowdown of China, which is driven by a rebalancing of the economy towards services and consumption-led growth. Against this background, businesses focus on the protection of their receivables’ portfolio from customers’ late payment
[one_fourth]a bank overdraft extension[/one_fourth]
As highlighted by the October 2016 Atradius Payment Practices Barometer for Asia Pacific, around 90% of the suppliers respondents in Asia Pacific reported having experienced late payment of invoices from their B2B customers. Due to this, most of the suppliers interviewed in Asia Pacific (34%) reported that they had to take specific measures to correct cash flow, and that they had to pay their own suppliers late (33%). 25% had to pursue additional financing from banks, factors or others to get the necessary funds to pay their own creditors, and 22% had to request a bank overdraft extension. This may explain why most of the businesses in Asia Pacific (20% of respondents) are of the opinion that cost containment and maintaining adequate cash flow will be the greatest challenges to the profitability of their business this year.
Andreas Tesch, Chief Market Officer of Atradius commented “Global growth, which is set to expand 2.4% this year (steady with last year) continues to be held back by low commodity prices, insufficient consumer demand in advanced markets, Chinese economic rebalancing, uncertainty surrounding global monetary policy, and geo-political risks. All this gives rise to concerns about increasing debt and deteriorating credit quality, being very likely to cause an increase in corporate bankruptcies in many emerging markets, especially in those depending on trade with China and/or commodities”.
Eric den Boogert, Managing Director of Atradius Asia commented “Credit conditions across most emerging markets continue to tighten in response to elevated regional and global economic uncertainty. Although economies in Asia-Pacific show decent economic growth compared to rest of the world, a record number of companies have seen delayed payments which is also supported by our own claims data”.
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.