‘All’ economic signals are green, but global payment behavior only deteriorates. Over the past 5 years, it has been an average of 64 days before outstanding notes were paid. In 2017, that period increased to 66 days. In 2018 there will be another day, according to the payment payment report, credit insurer Euler Hermes recently published.
The Netherlands is still one of the best paying countries, although we have dropped out of the top three. According to Euler Hermes, there is a sharp deterioration of payment behavior in our country in specific sectors such as telecom, technology and support services. Johan Geeroms, Head of Risk Underwriting of Euler Hermes Nederland: “There is a deterioration, but the most important thing is that we are still in the top of the world, which is good for our international trade positon. You do not want to do business with defaulters. ”
Worse and worse
The most widely used measuring instrument in the world to interpret payment behavior is DSO (Days Sales Outstanding). The DSO ratio indicates how long it takes on average for a company to receive an invoice. The DSO for 2018 of 67 days is a global average. The Netherlands reached 50 in 2017. In 2015 it was 47. In the report, Euler Hermes zooms in on the figures. This shows that especially poorly paying countries have started to pay worse.
Johan Geeroms: “Since 2009, world trade has shown a good recovery. But if you compare that growth graph with the DSO graph, you see an increase that exceeds economic growth. You would not expect it, but the better the economy runs, the worse it will be paid. Companies need capital to finance their own growth; partly that can be achieved by having suppliers wait. But if companies do not pay attention, it works like a lasso in which they themselves get entangled. Growing is nice, but also risky, it costs money. Research shows that two thirds of the five thousand fastest growing companies in the United States were taken over or went bankrupt three to five years later. ”
Wait 90 days
The Euler Hermes report shows that one in four companies in 2017 must wait 90 days for their money. In emerging countries, this applied to one in three companies. According to Geeroms this applies in particular to sectors such as electronics, construction and machine construction. “90 days is not special here. This is very different in sectors such as transport and fresh goods If you bring flowers or vegetables to an auction every day, you must of course get your money quickly, otherwise you will not get it financed, so the DSO is significantly lower in those sectors. ”
The research by Euler Hermes shows that the payment behavior during the cyclical dip around 2007 quickly improved rapidly. Geeroms: “That remains a peculiar phenomenon. On the one hand, companies in bad times try to improve their liquidity position by postponing payment of their invoices. But at the same time it seems that cost awareness leads to a tighter payment regime. In economic good times the payment morale becomes looser.
Countries where the DSO is rising the fastest are the US, part of the euro zone and China. China is evolving rapidly to a DSO of 100.