More than half of the value of B2B receivables 90 days or more overdue were written off as uncollectable by businesses in the U.S., Canada, Mexico and Brazil, according to the latest Atradius survey of B2B suppliers in those countries.
The Payment Practices Barometer survey for September found that, on average, 38.4% of the total value of B2B receivables were unpaid by the due date, compared to an average of 35% in Europe.
Survey respondents report they are keeping a strong focus on credit management, with 81.5% employing credit management policies to ease B2B trade credit risks. To help reduce payment defaults, approximately 50% of respondents are checking their buyers' creditworthiness, requesting secure forms of payment or both. Still, uncollectable receivables continue to be a worrisome issue for companies, many respondents indicated.
The impact of unpaid invoices on cash flow can be critical as bad debt reserves represent money that is unavailable to use in growing a business. Non-payment by buyers, and the subsequent collection efforts that ensue, also cost time and money.
David Huey, regional director of Atradius Trade Credit Insurance NAFTA said: "The economy may be showing signs of recovery but late payments, defaults and business failures remain facts of life. The survey results simply underline the need for all businesses to be vigilant in their credit management and to protect cash flow and profitability against non-payment through instruments such as credit insurance."
Late payments led to a marked disparity between average payment terms (28 days) and average Days Sales Outstanding (48 days), according to the survey. The gap highlights why nearly a third of the survey respondents reported that maintaining sufficient cash flow in 2014 has been the greatest challenge to profitability.
The complete report highlighting the survey findings of the 2014 Atradius Payment Practices Barometer for the Americas can be found here.