According to credit insurer Atradius, the retail sector is currently the UK’s sector with the fastest payment times.
UK businesses are currently displaying the quickest payment times in Europe at just 25 days for export sales, the shortest export payment term set in the entire history of the biannual Atradius Payment Practices Barometer. However, retailers have gone one step further with an average of just 17 days from invoice to payment indicating that businesses in the sector are paying more promptly than any other.
The Autumn 2011 Payment Practices Barometer, of over 5,200 companies across 27 European countries, showed that UK businesses set an average sales payment term of just 26 days in the domestic market and 25 days for export sales; 10 and 11 days below the European average respectively.
Payment terms were also found to be closely linked to company size with micro-enterprises operating payment terms of 21 days for domestic and 22 days for foreign while large companies set payments terms at 32 days from receipt of goods, but still shorter than their European neighbours. The standout trend was the stance taken by financial services companies which set the longest domestic payment terms of 30 days on average and the shortest export payment terms at just 19 days. This suggests that this industry sector had relative reservations about the payment morality of its domestic clients.
Marc Jones,Head of Sales for Atradius UK, explains: “As this report shows, businesses are now much more likely to adapt their payment terms depending on the sector of the buyer they are dealing with. If it is a sector that has been badly impacted in the economic climate, businesses are remaining astute about what payment terms they extend to them compared to those who have performed more robustly. Company standard terms are cited as one key reason, together with trade relationship with the customer and industry standard terms, for adapting domestic and foreign trade payment terms. Credit capacity of the customer, type of product sold and the competition have also been key factors in setting credit terms and balancing company policy with other external factors.”
The Atradius Payment Practices Barometer also revealed:
– The standout ranking was that 60% of respondents from large enterprises cited trade relationship with the customer as a major influence on setting export payment terms
– 41% and 46% respectively of medium/large companies highlighted credit capacity of the customer as a major domestic and export payment term determinant
– 47%of large businesses across (insert region) and the UK singled out company standard terms as the predominant driver of export payment terms
– By sector, 57% of respondents from the UK financial service industry flagged up both trade relationship with the customer and industry standard terms as key determinants for export payment terms
– Industry standard ratings were also spotlighted by 54% from the manufacturing industry as the most important domestic influence on payment terms
– Also worthy of note is that 50% of financial services firms ranked credit availability and type of product sold as major drivers of foreign sales terms
– British businesses showed a relatively keen appetite for discounting for early B2B payments in an attempt to reduce trade and export credit risk, offered by 44% of respondents compared with the European average of 37% Particularly among manufacturing firms and financial services companies
Source : Atradius
