According to a study, global payment practices deteriorated more 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 study published on Thursday by the credit insurer Allianz Trade. The increase was almost twice as high as in 2022.
Germans are faster
German companies therefore remain reliable “quick payers”: they pay invoices on average following 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 considered the most 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, might create the conditions for further deterioration in payment terms, particularly in Europe.
“A drop in profitability of just one percentage point might 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.”
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