Intrum: Delays in payments are a headache for Greek businesses

Businesses’ need for specialized management of the effects of inflation is pervasive, according to the annual European Payment Report for Greece released today and which had present Capital.gr on June 22.

According to the survey, 55% – in proportion to the European average of 51% – respondents from Greek businesses state that their company is stronger or as strong in April 2022 compared to before the start of the pandemic, in March 2020.

Seven in 10 (68%) admit that – despite the fact that the pandemic has pushed them to improve financial management – ​​they lack the necessary knowledge and internal infrastructure to cope with the challenges arising from rising inflation. The corresponding percentage for European companies is lower by 10 percentage points (58%).

When it comes to rising inflation, around half of businesses (46%) believe it is hindering their growth strategy.

Around half (52%) of businesses are concerned about the consequences of rising borrowing rates, although around three in 10 (33%) say they will secure or have already secured additional funding.

Credits

The lengthening of the payment time puts significant pressure on businesses. A particularly high percentage (85%) of the businesses that participated in the survey reported that they had to accept longer payment times from their customers during the last 12 months. Six in ten (59%) respondents are finding it increasingly difficult to pay their suppliers on time.

Liquidity

Greek businesses are taking actions to protect their liquidity and implement their development plans. With the aim of improving the management of overdue payments, 73% of respondents – a percentage corresponding to the European average – said they are focusing on early arrears, while 32% on digitization and investments in new technologies. The corresponding European average is 10% lower, reflecting the significant need for digital transformation in Greek businesses.

Strategic business initiatives for 2022, for both incoming and outgoing payments, are improving credit risk management (33%) and re-evaluating contracts with key suppliers and partners (32%). Also, 82% aim to improve debt management.

To prevent any delays, 45% ask for a down payment (versus 40% in 2021), while 35% perform a credit check on customers. Regarding the measures businesses take when customers request an extension of payment time, 31% offer improved terms, while the same percentage (31%) do not negotiate at all and 26% offer, as an alternative, a discount.

Delays

Six out of 10 survey participants in Greece – a particularly high rate – said they take legal action to deal with a late payment or default by a customer. The next most preferred treatment is the use of internal recovery procedures (39%).

Improving customer payment time to a business is “key” to the viability of both the business itself and its suppliers. Although 46% of surveyed businesses report that their credit losses decreased in 2022 (an improvement of 10 percentage points over 2021), late payments still have significant consequences. Improving customer payment time to businesses would in turn enable businesses to repay their suppliers faster (75%), improve sustainability performance (70%), develop products and services them (68%) and pursue digital innovation (43%).

Greek businesses are now more aware of debtors’ ability to pay on time. Businesses remain vigilant about the issue of late payments, as the percentage of respondents who say they are more aware than ever about paying on time has increased to 65% for 2022 from 61% in 2021.

Bad debt losses and complications from late customer payments remain a drag on business growth investment, but not as much as in the past. In particular, only 35% of respondents state that in the last 12 months complications from late payments stood in the way of investments, compared to 45% in 2021 and 55% in 2020.

However, survey participants believe that the propensity for late or defaulted payment by their customers will improve, with 40% estimating the associated risk to be stable or reduced over the next 12 months, compared to 34% in the 2021 survey.

Environmental sustainability is proving to be a key factor in business sustainability. Six out of 10 businesses surveyed believe that if they do not demonstrate that they take their environmental responsibilities seriously they will soon lose customers. Four in 10 respondents (42%) believe they will be out of business within the next decade if their business does not improve on sustainability. A further six in 10 (60%) are already accelerating the effort to develop into a sustainable business. The corresponding European average is 63%.

Fostering a sustainable culture of timely payments is a necessity. Despite concerns about the increasing trend and the impact of late payments, the percentage of businesses that have not adopted a relevant code of conduct in Greece has increased to 73%, when the corresponding percentage for 2021 and 2020 was 68%. Also, despite the enactment of the European Directive on Combating Late Payments in Commercial Transactions, the percentage of businesses that take advantage of the possibilities provided by the directive stands at 59% and remains stable compared to 2021 (58%).

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Intrum: Inflation and late payments, the two thorns for Greek businesses