The weak economy, persistently high inflation and restrictive monetary policy are putting many companies in Germany under massive pressure. The result: payment behaviour in B2B business continues to deteriorate. This is according to the latest payment barometer from international credit insurer Atradius. The proportion of invoices paid late among survey participants rose from 51 to 57 per cent last year. ‘The current challenges are forcing companies to protect their liquidity much more. This has a direct impact on payment behaviour and exacerbates financial uncertainty,’ says Frank Liebold, Country Director Germany at Atradius.
The proportion of irrecoverable receivables in the B2B sector increased from eight to ten per cent last year; the survey participants ultimately had to write these off as losses. Another indicator of the imbalance in the German economy is the increased DSO value (Days Sales Outstanding, average collection period in days). This indicator has risen particularly in the construction industry, where around one in two companies (47 per cent) reported a higher DSO value than in the previous year. According to the Atradius survey, the average collection period in the German construction industry rose to 87 days from invoicing. In the automotive industry, where 39 per cent of companies reported a deterioration in outstanding receivables in the last twelve months, the average collection period was 68 days. A widespread deterioration in DSO can also be observed in the consumer durables sector, where the average collection period is currently 45 days.
Overall, 50 per cent of the 215 companies surveyed on behalf of Atradius are waiting longer to pay their invoices. ‘The consequences for the affected companies are immediate cash flow problems, difficulties in fulfilling financial obligations and investment delays,’ explains Frank Liebold. Added to this are rising credit costs and dependence on short-term financing, as well as the slowdown in payments by companies to their own suppliers.
Securing liquidity more necessary than ever.
Due to the long waiting times for payments, companies are having to do more to maintain liquidity in order to secure ongoing operations. For example, 57 per cent of companies in the construction sector stated that they had used trade credit – i.e. credit granted by suppliers to their customers to settle their liabilities – as their main source of financing in the past twelve months. Most companies in the consumer durables sector cite bank loans as their main source of financing, while just over half of companies in the automotive sector prefer bank loans and 45 per cent use trade credit. Overall, bank loans were the most important source of financing for 62 per cent of the companies surveyed in the past twelve months.
Bleak future prospects in the assessment of payment behaviour.
When analysing the survey results, it becomes clear that an improvement in payment practices is not in sight. The companies surveyed are concerned in the short, medium and long term due to the weak growth of the domestic economy, low consumer confidence and the lack of momentum on the labour market. ‘36 per cent of companies across all sectors expect a deterioration, while the remaining companies surveyed expect either an improvement or no change in payment behaviour,’ says Frank Liebold. Most companies across all sectors in Germany expect to have difficulties meeting their financial obligations in the coming months, including the need to slow down payments to their own suppliers in order to reduce the risk of liquidity bottlenecks.
Against this backdrop, the fear of an increasing number of company bankruptcies is also on the rise, according to the survey: Just over 70 per cent of the companies surveyed anticipate an increased risk of insolvency in B2B trade. ‘This shows a deep concern about future economic stability and possible cash flow problems,’ explains Frank Liebold. This negative assessment is particularly evident in the construction sector and in the German automotive industry, where 41 per cent of companies also anticipate a deterioration in the payment behaviour of B2B customers over the next twelve months.
The different expectations of German companies with regard to the efficiency of debt collection and cash flow management in the coming year are made clear in the Atradius survey. Overall, 39 per cent of the German companies surveyed expect a deterioration, while the others are either more optimistic or more uncertain.
46 per cent of companies in the construction industry expect the days sales outstanding to deteriorate over the next twelve months. This indicates greater concern about the risk of financial instability, particularly among companies that rely on prompt payment to maintain their business. In contrast, 45 per cent of companies in the German consumer durables industry expect no change in DSO, suggesting stability in payment collection. In the automotive industry, there is no clear opinion, with a third of companies optimistic about DSO and the rest either uncertain or pessimistic. “The results of our survey emphasise the need for companies to develop effective receivables management and financing strategies in order to overcome the challenges of the coming months,” says Atradius Germany CEO Frank Liebold.
The Atradius Payment Practices Barometer Germany 2024
The Atradius Payment Practices Barometer Germany is part of the current Payment Practices Barometer Study Western Europe by the international credit insurer Atradius. For the study, companies in a total of 14 markets were surveyed on payment behaviour in corporate business: Austria, Belgium, Denmark, France, Germany, Greece, Ireland, Italy, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and, for the first time, Finland. In Germany, a total of 215 companies were surveyed from the construction, consumer durables and automotive sectors. The size of the companies surveyed ranged from small companies to large corporations.
