Cash flow woes mount for Asian firms as credit quality deteriorates

Complex payment methods are also a cause for concern.

More businesses in the region are being pressured by the stresses of maintaining sufficient cash flow, reflecting a growing concern about a deterioration of the credit quality in several countries in the region.

According to the latest Atradius Payment Practices Barometer for Asia Pacific, businesses in the region reported that on average, 36.2% of the total value of their B2B receivables remained unpaid when due.

While the primary reason for payment delays from domestic customers is insufficient funds (cited by 47.3% of survey respondents), foreign invoices are more likely to go unpaid due to complexity of payment procedures.

Complexity of payment procedures for foreign customers was experienced most by Chinese respondents (55.9%). Around 30% of respondents in the region stated that domestic and foreign buyers often delay payment as a source of surrogate financing.

With 4.4% of the B2B receivables remaining unpaid after 90 days overdue, and half of this value written off as uncollectable, respondents in Asia Pacific lose, on average, 50% of the total value of their receivables that are not paid within 90 days of the due date (average for Europe and the Americas: 35.0% and 51.9% respectively).

Against this backdrop, it comes as no surprise that there is growing concern about cash flow levels across several countries in the region.

Overall, more than one in three respondents in the region consider this their biggest challenge to profitability this year. By country, this is felt particularly keenly in Taiwan (43.5% of respondents).

Across the region, nearly 72% of respondents reported they become concerned about the sustainability of their businesses when DSO exceeds the average payment term by 31 days. 70% of survey respondents use at least one credit management practice to protect their cash flow and improve the financial stability of their business.