69176
Alibaba launched a credit rating website in China called Cheng Xin that allows users to search for the name of a firm and  gain access to the credit score of any company in the database.
Alibaba launched a credit rating website in China called Cheng Xin that allows users to search for the name of a firm and  gain access to the credit score of any company in the database.

Overdue Payment Risks Seen Rising Across Asia

The most noticeable deterioration of non-payment risk was in China, followed by Thailand and Australia

Overdue Payment Risks Seen Rising Across Asia

Pickup in global growth remains on track, according to the International Monetary Fund’s July outlook update, with global output projected to grow by 3.5% in 2017 and 3.6% in 2018. Despite the optimistic forecast, companies in Asia continue to have difficulties getting paid.
Overdue payment risks appear to be continuing to increase across the board, Coface found in its recent 2017 Asia Corporate Payment Survey, with 64% of the companies surveyed experiencing overdues and the average number of payment overdue days lengthening, GTNews reported.
The most noticeable deterioration of non-payment risk was in China, followed by Thailand and Australia. Moreover, considerably more respondents reported suffering from ultra-long-overdue amounts which exceeded 2% of their total annual turnover.
Confirming the difficulties companies face, Euler Hermes noted late last year that about 25% of companies worldwide were paid after more than 88 days. Late payments were particularly worrisome in China, where days sales outstanding climbed to a nine-year high of 89 days.
Other countries in Asia with DSO well above the global average include India, at 67 days, and Japan, at 69 days. Those results came despite cash continuing to grow for Asia Pacific and even though one of the fastest increases in cash accumulation took place in China, with a 95% rise since 2010.
The Atradius Payment Practices Barometer Asia Pacific 2016 similarly showed that nearly 90% of the survey respondents reported having received late payments of invoices from their B2B customers.

Solutions Abound
The question for many corporates, then, is how they can improve their payments situation, DSO and working capital despite the deterioration in payments. Fortunately, new solutions are increasingly becoming available.
One practice is to speed up invoicing. The longer it takes for a customer to receive an invoice, the longer it takes for them to make a payment. One of the biggest challenges that companies in Asia have is that they’re continuing to use manual processes for everything from invoicing to accounting.
The PWC Global Treasury Benchmark Survey 2017 found that companies in Asia use only about two treasury systems solutions, compared to nearly six in western Europe, which PWC said suggests “a lot of work is still done manually and that their automation and tooling may not be as sophisticated". By automating their billing processes, companies can reduce the time to send an invoice, which can reduce their DSO as well as late payments.
When invoices are sent, shortening credit terms can help as well. In Singapore, for instance, DP Information Group found that SMEs have tightened their credit terms and are getting paid 19 days earlier than just two years ago.

Bridging the Gap
New supply chain finance techniques can also help bridge the gap. When buyers have a bank provide financing that advances cash to the supplier at competitive rates, while allowing buyers to deepen a supply relationship, suppliers can benefit by taking up the financing. With payment terms averaging about 80 days in Asia compared to about 50 days globally, according to Vijay Vashist, of Singapore-based DBS Bank global head of trade and supply chain finance, large companies that offer SCF services for their suppliers will help them tremendously.
Accepting corporate cards or wallets for B2B payments is a growing solution as well. While corporates have traditionally been reluctant to accept cards due to the cost, paying a merchant discount rate of about 2% or less in markets where the cost of funds is relatively high can help deliver payments faster and improve working capital.
One newer tool is solutions to evaluate buyer credit-worthiness. Coface found, for example, that only half of the companies checked and monitored buyer credit-worthiness. Fortunately, the process for checking credit is starting to become easier.
Earlier this year, for instance, Alibaba launched a credit rating website in China called Cheng Xin that allows users to search for the name of a firm and gain access to the credit score of any company in the database. Alternative credit scoring firms, as well as crowd-lending companies, are similarly leveraging new credit scoring models in other parts of Asia, which may soon enable corporates to check their counterparties’ creditworthiness.

 

Short URL : https://goo.gl/Qm3YHh
  1. https://goo.gl/mYgACJ
  • https://goo.gl/qQAGjk
  • https://goo.gl/uk31tg
  • https://goo.gl/9oLi4U
  • https://goo.gl/M4U6Jr

You can also read ...

US Economy Back on Top of World Competitiveness Ranking
Marking its 30th edition this year, the IMD World...
Some 96% believe that bribery and corruption was an important issue to tackle.
Almost one out of two large global companies experienced some...
Deutsche Bank Will Cut 7,000 Jobs
Deutsche Bank said on Thursday it will reduce global staff...
Taiwan Growth Forecast Upgraded to 2.6%
The directorate general of budget, accounting and statistics...
China Debt Crackdown Leaves Institutions Short of Cash
China is cutting off funds to financial companies and banks...
Turkey Raises Rates Sharply to Prop Up Lira
Turkish President Recep Tayyip Erdogan is facing a potentially...
Two Oman Banks Discuss Merger
Oman Arab Bank has initiated merger talks with fellow Muscat-...
MSCI’s broadest index of Asia-Pacific shares outside Japan was almost flat.
Market sentiment was a little shaky on Friday with Asian...

Add new comment

Read our comment policy before posting your viewpoints

Trending

Googleplus