Go west but get the complete picture first

Amid Western Europe’s financial crisis, credit insurers like Atradius protect you against financial risks and help your business grow.

Pick up a newspaper, watch televised business reviews or check online newswires and you’ll see a similar story: Western Europe is battling an epidemic of diminishing business and consumer confidence, falling demand and spiralling debt. While much of this is true, the dramatic presentation of events by the media to attract an audience can magnify their affect and contribute to the situation by further depressing both business and consumer confidence.

The whole picture
News presentations are not the only influence of market sentiment. Market’s also rely heavily, and rightly, on the judgement of professional economists, although, of late, they too can tend towards a pessimistic view. How often has a conference speaker, begun their speech with the cliche that economists have predicted nine out of the last five recessions? Like many clichés, this statement contains an element of truth and while consensus among economists is a rare thing, pessimism about the global economy has become a safe path to tread in the face of the global economic indicators.

While optimism is what is needed - Keynes wrote of the “animal spirits” that can affect economic activity - it can be hard to find many positives in the current macro world of economists analysis. But what is the view of those operating at the “coal-face” of business trade? What is being experienced by finance managers, purchasing managers and sales people on the ground in Western Europe?

Using actual experience in your assessment 
At Atradius, while we place a high value on the macro-analysis and forecasts of our economic experts, we also seek a comprehensive picture of the global marketplace. We seek first-hand knowledge from those at the very forefront of national and international trade and we factor their experience into our trade risk assessment. The Atradius Payment Practices Barometer, a survey of business of all kinds across the world, asks those who are actively participating in global markets of commerce and trade for their views and experiences. We ask questions regarding their business-to-business payment experience. Are their customers paying on time, late, or not at all? What steps are they taking to keep their cash flow healthy, encourage early payment and avoid bad debts?

Atradius’ latest Payment Practices Barometer surveys business experience in Western Europe, and it serves as a useful guide to any business in Singapore that is already trading in Europe, or has an eye on Western European countries as a potential market. It can help you avoid making strategic sales decisions, based solely on what you’ve gleaned from the media or economic research houses, and the information contained in the report is coupled with Atradius’ unique analysis.

Take the survey responses to the question ‘What percentage of the total value of your B2B invoices are overdue?’ As could be expected, three Eurozone countries presently struggling to mend the economic damage of the debt crisis are Greece, Italy and Ireland – report a sizeable volume of late payments from their domestic customers, as high as 41% in Greece. Surprisingly, the German survey respondents also report a considerable level of late payments from their domestic customers with results at 31%. While over half of Germany’s late payments are settled within 15 days of their due date, that still leaves numerous debts outstanding with a notable portion paying over 90 days late.

Most of the surveyed companies in Germany, Austria, Sweden, Great Britain, The Netherlands, Denmark, and Switzerland, keep a tight rein on their exposure to the risks of non-payment by restricting contractual payment terms to no more than 30 days credit. Potential suppliers from Singapore may therefore consider this to be an acceptable norm for sales to these countries. Terms of payments are, however, a matter for agreement between the contractual parties and can provide a point of difference in a competitive market where working capital and cashflow is provided at a premium.

Many of the businesses surveyed by Atradius, while acknowledging that financial trading risks may not lessen over the rest of 2012, saw them bottoming out. Notably, over 72% of Dutch and 78% of Danish respondents believe that the risks will remain unchanged or decrease, while the same goes for 84% of Turkish and Swedish respondents. In addition to a difference at the country level across Western Europe, we also see variation when analysed by trade sector and note that wholesalers and retailers were the most pessimistic about their short-term trade credit risks.

Charging it to experience
However the economic performance of Western Europe develops, credit insurance provides vital protection against unforeseeable financial risks and enables businesses to expand into new markets or grow existing customer relationships. Credit insurers can help you realise the potential in your customers and highlight the most worthwhile sales prospects by assessing the creditworthiness of your prospective commercial customers an supporting that assesment with an insurance policy against their insolvency or protracted default of payment. 

You can download Atradius’ detailed Payment Practices Barometer from www.atradius.sg

Michael Frigo, Atradius Country Manager – Singapore

Atradius Credit Insurance NV (Singapore)
#31-02, AXA Tower, 8 Shenton Way
Singapore 068811
Tel: +65 - 6372 5316
Email: [email protected]