Hong Kong: trade credit risk trends upward

Индикатор платежной дисциплины

Индикатор платежной дисциплины

  • Гонк Конг
    Гонк Конг
  • Химия/Фарма,
    Химия/Фарма
  • Строительство,
    Строительство
  • Потребительские товары,
    Потребительские товары
  • Электроника/ИКТ
    Электроника/ИКТ

28 июн 2022

28 июн 2022

An alarming increase in bad debt write-offs worries companies in Hong Kong, prompting them to seek strategic credit risk management solutions.

An alarming increase in bad debt write-offs worries companies in Hong Kong, prompting them to seek strategic credit risk management solutions.

Introduction

The 2022 edition of the Atradius Payment Practices Barometer survey findings for Hong Kong is a valuable opportunity to hear directly from companies about how their business operations are coping with the disruptive impact of the current challenging economic and trading circumstances.

Topics covered include: payment terms set for business-to-business (B2B) customers, the average time it takes to turn overdue B2B invoices into cash, the impact of late or non-payment on the business, and expected challenges to profitability during the coming months.

The survey questionnaire was completed by businesses in Hong Kong during Q2 2022. Responses given by companies polled are contained in the report for Hong Kong, which is part of the June 2022 edition of Atradius Payment Practices Barometer for Asia availbale on this website by clicking here.

Key takeaways from the report for Hong Kong

Unpaid invoices a serious concern, write-offs trend upward

  • Businesses in Hong Kong face a rising level of trade credit risk, with 48% of the total value of B2B invoices reported as overdue, and 6% of outstanding payment being declared as bad debt and written off (up 50% from 2021 survey). This has sparked increased awareness among most businesses polled about the importance of strategic credit risk management in B2B trade. Most companies told us they opted to either purchase specific trade finance solutions or outsource the problem to a credit insurer. A quarter of the businesses polled said they retained and managed customer credit risk in-house.
  • A strong focus on minimising year-on-year swings of Days-Sales-Outstanding (DSO) was reported by businesses, who said they took a variety of actions to protect cash flow and profitability. A significant number of companies polled told us that having a credit insurance cover helped them improve DSO and thus free up working capital.

Impact of pandemic adds further strain on businesses

  • Hong Kong companies told us they have several concerns for the year ahead, the primary issue being protection of their business against the ongoing impact of the pandemic. Amid expectations of a significant decrease in insolvencies this year, due to the government’s strong fiscal support, Hong Kong businesses express concern over the ability to safeguard liquidity levels to meet their operational needs. Adding to this is the worry about effective management of the costs involved with managing trade receivables in such a challenging economic environment.
  • Despite this uncertain outlook, most companies expect some improvement in B2B payment practices during the next 12 months, and believe this may encourage sales growth with new B2B customers going forward. However, seeing a tough trading environment ahead, many companies told us that the adoption of a more liberal credit policy towards B2B customers will require a properly conceived credit management to protect the viability of the business.

Key survey findings for Hong Kong

  • B2B sales on credit drop amid concerns over payment default by customers
  • Cost of capital to finance credit sales key criteria in setting payment terms
  • Concerns about unpaid invoices prompts push for enhanced credit management
  • Liquidity issues, admin troubles and customer disputes spark payment default
  • Strong focus on credit control and avoidance of credit risk concentration
  • Trading on credit expected to increase, chiefly to win new business
  • DSO worsening, impact of pandemic on cash flow and profits worry businesses

Interested in finding out more?

Please download the complete report for a complete overview of the payment practices in Hong Kong and in the following local industries:

  • Chemicals/Pharma
  • Consumer durables
  • Construction materials
  • Electronics/ICT

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