Harbinger of bankruptcies
Payment behavior is worse than it has been in 15 years
April 4, 2024, 5:47 p.m
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International companies will need a full 59 days to pay their invoices in 2023. That’s three days more than last year. The increase is as high as it was last seen in the financial crisis of 2008. Companies in some countries are significantly more reliable than others.
According to a study, global payment practices deteriorated more sharply last year than at any time since the financial crisis of 2008. The period between invoicing and payment has increased by three days to 59 days, according to the Investigation of the credit insurer Allianz Trade emerges. The increase was almost twice as high as in 2022.
German companies therefore remain reliable “quick payers”: they pay invoices on average after 54 days, an increase of 0.8 days. Companies in the Netherlands and Scandinavia also pay faster than the global average. In France, Italy and Spain as well as in Asia, bills are paid significantly later on average.
“The longer companies have to wait for their money, the more likely it is that the invoice will not be paid at all,” said the head of Allianz Trade in Germany, Austria and Switzerland, Milo Bogaerts. “In this respect, payment behavior is an important indicator of potential payment defaults and thus a harbinger of insolvencies.” German companies still have comparatively good payment practices. Nevertheless, Bogaerts expects that the number of bankruptcies in the Federal Republic will increase by 13 percent this year.
Profitability is the tip of the scale
Profitability is an important factor influencing payment behavior in Europe. According to the study, it has a greater impact than financing or the economic cycle. In this context, a slowdown in global demand in 2024, coupled with continued high operating costs, could create the conditions for further deterioration in payment terms, particularly in Europe.
“A drop in profitability of just one percentage point could extend payment terms by over seven days,” said Ano Kuhanathan, head of corporate research at Allianz Trade. “In view of the threat of a loss of profitability in 2024, European companies should prepare for longer payment periods.”