ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...

28 EPI 2010
European Payment Index (EPI) 2010
– on the right path
Since 1998 Intrum Justitia has conducted an annual survey of changes in payment
behavior in Europe. The results are used to gain a better understanding
of how European companies view payment behavior in their country and
how an entire nation’s economy is negatively affected by late payments.
The 2010 survey revealed that many of the 3,900 or so small
and medium-sized enterprises included in the survey are
still having financial problems, despite political pledges
about recovery. European banks are still cautious in granting
credit, which is mainly affecting small businesses.
The increasing percentage of bankruptcies in 2009 in Europe
gave rise to an increase in write-downs. In 2009 169,000 European
companies filed for bankruptcy. The European Commission’s small
and medium-sized enterprises section predicted that this figure
would grow to 200,000 in 2010, which represents an increase of
18 percent. The unwillingness of banks to extend more credit to
small and medium-sized enterprises is probably driving this trend.
SLOW RECOVERY
Despite the fact that growth in Europe is modest, there are signs
today of a slow recovery in several European countries. The conclusion
from the European Payment Index is that the late payment
situation has stabilized since 2009, but that the future for European
businesses is still uncertain. In the countries hit the hardest
by the financial crisis in 2008 and 2009, there are still few signs of
improvement in terms of getting paid on time for products and
services. Pessimism is highest among companies in the countries
hit the hardest by the financial crisis.
SHORTER LATE PAYMENT PERIODS
BUT INCREASE IN WRITTEN-Off RECEIVABLES
One piece of good news from the 2010 EPI is that the average late
payment period for payments in Europe, i.e. the period after an
invoice falls due for payment, has gone down by one day, from 19
NO. OF
DAYS
15.1
16.3 16.8
16.0
17.0
04 05 06 07 08 09 10
LATE PAYMENT IN EUROPE,
average
19.0
18.0
days in 2009 to 18 days in 2010. This means that companies are
waiting for a shorter period for payment compared to just over a
year ago. This good news is counteracted by the fact that the average
percentage of receivables that are written off has risen to 2.6 percent,
from 2.4 percent the previous year – a figure that was 1.9 percent
in 2007. This means that the percentage of invoices that are never
paid and ultimately written off has increased every year since 2007.
Somewhat surprisingly, companies tend to react slowly when it
comes to handling late payments. Despite the obvious drawback of
getting paid late or not at all, close to 65 percent of companies wait
an average of 85 days before sending a case to a credit management
company.
BETTER LEGISLATION IS NEEDED
Outside the Nordic countries most respondents in the survey want
better legislation to enable them to collect reminder fees and penalty
interest as this is difficult when it is not the normal practice in
their country. In the Nordic region this is supported by local regulations
and payment patterns here are much healthier compared
with countries in, for example, Southern Europe.
An obvious consequence of late payments is lost income and
lower liquidity for companies. This, combined with a lack of confidence
that banks will provide businesses with financial support
to generate growth, makes for a challenging situation for many
small and medium-sized enterprises. The results of the European
Payment Index emphasize the need for better credit management
by many European companies. Analyzing the creditworthiness of
prospective clients and thereby being able to offer several payment
options is a step in the right direction.
€
€
€
1.7% 1.9% 1.8%
04 05 06 07 08 09 10
CREDIT LOSSES IN EUROPE,
average
1.9% 2.0% 2.4% 2.6%
PERCENTAGE OF
TOTAL TURNOVER