B2B Payment Practices in Asia

Half of Asia’s B2B invoices are overdue and bad debts soar as region chases late payments

Region writes off 7% of total value of B2B sales, a huge year-on-year increase

As businesses struggled with the ongoing issues affecting supply chains and pandemic lockdowns, increasing numbers delayed paying suppliers and a significant number failed to pay their invoices at all during the past 12 months. According to respondents to the Atradius Payment Practices Barometer Survey across eight of Asia’s major markets, 7% of the total value of B2B invoices were written off. This represents a massive 60% increase compared to the previous year. The one exception to this gloomy pattern is the United Arab Emirates where the late payments rate improved year-on-year.

Increasing appetite for credit insurance in China

Businesses in China revealed a growing interest in trade credit insurance, with 20% of those polled telling us that they were more likely to adopt this risk mitigation measure than in the past. Virtually every business we spoke to in China that already uses trade credit insurance, either on its own or alongside other tools such as factoring, also told us that they plan to continue using it next year. China reported the lowest percentage of bad debt in Asia this year, with an average of 3% of the total value of B2B invoices written off.

 Hong Kong chases increase in bad debts

Nearly half of the total value of B2B invoices in Hong Kong were overdue this year and 6% were written off, a year-on-year increase of 50%. Businesses in the territory told us they have several concerns for the year ahead, the primary issue being the protection of their business against the ongoing impact of the pandemic and their ability to safeguard liquidity levels.

 Late payments and write-offs hit Indian consumer durables sector hard

 India’s consumer durables sector has suffered particularly hard from disruptions to global supply chains, reporting an average write-off rate of 12% of the total value of B2B invoices and 60% late payments. Indeed, the majority of the businesses polled across sectors in India reported issues with late payments. To address this, nearly three in five businesses said they often requested cash payments, many businesses increased the frequency of customer credit checks, and just under half said they actively avoided credit risk concentrations.

DSO deteriorates for a third of businesses polled in Indonesia

 A significant number of the businesses we interviewed in Indonesia told us they had struggled with late payments, with one third reporting a worsening of DSO. The most commonly used tactics for addressing late payments included discounts for early remittance and the use of professional debt collection agencies. However, a significant percentage also told us they intend to use credit insurance moving forward. Among the sectors polled in Indonesia, the paper industry reported the greatest percentage of late payments and write-offs.

Singapore reports greatest percentage of write-offs in Asia

 9% of the total value of B2B invoices were written off in Singapore this year, an increase on the 6% reported last year. Write-offs were worst in agri-food industry, with an average of 11% of the industry’s total value of sales, up from 4% in 2021. The poor payment practices experienced by businesses in the country over the past 12 months may explain the year-on-year drop in credit sales, with a significant number of businesses telling us that they had recently rejected customer credit requests.

Geopolitical issues impact business confidence in Taiwan

 A third of the businesses polled in Taiwan expressed concern about maintaining profitability over the coming months, and cited worries over geopolitical issues, ongoing impacts of the pandemic and supply chain issues. The survey results also paint a picture of economic stress, with a sharp rise in both bad debts and late payments, especially in the chemicals industry.

 Credit increasingly popular in Vietnam, although payment defaults cause worry

 Almost seven in ten companies, the majority from the consumer durables industry, said they accepted B2B trade credit requests far more often than they had previously. However, 48% told us they experienced payment delays this year and an average of 6% of the total value of B2B invoices was written off. The majority of these were caused by customer liquidity issues. Although most of the businesses that have credit insurance told us they intend to renew their policies next year, retaining credit risk in-house is still the primary method of credit management in the country.

Improvements in payments practices reported by businesses in UAE

 According to respondents to the Payment Practices Barometer survey in the United Arab Emirates, the rate of bad stabilised and late payments declined year-on-year (to 53% down from 60% last year). This may be linked to the fact that many more businesses opted to outsource the management of customer credit risk to a credit insurer than did so last year. There was also an increase in those buying specific trade finance solutions to complement in-house credit management or insurance.

Download the Payment Practices Barometer: Asia paper here