Asia sees major increase in bad-debt write-offs, says Atradius

Asia has seen a 60% increase in business-to-business (B2B) bad debts that could not be collected in the last year, according to credit insurer Atradius’s Payment Practices Barometer Survey for Asia. Atradius said this is expected to pose a severe threat to liquidity of companies in Asia. “Chasing down unpaid B2B trade debt has become a major headache for Asian companies trading on domestic and export markets. They are facing sharply increased costs to manage customer credit risk in-house and thus protect cashflow from disruption caused by the current challenging economic and trading environment,” said Atradius. “The problem becomes even more serious with long-term unpaid B2B trade debt (more than 90 days) that is written off as uncollectable despite several attempts to receive payment.” Andreas Tesch, chief market officer of Atradius, said: “The outlook for growth in Asia remains relatively robust at around 5% in both this year and 2023. But many of the region's businesses operate across the world in the current deeply unsettled period, where the ongoing impact of the pandemic and geopolitical upheaval have meant a downward revision of the outlook for global growth to just above 3%. Companies in Asia are feeling the pinch from this widespread disruption in the global trading arena. Facing the increase in bad-debt write-offs can be a warning sign of a business environment under financial stress. This certainly explains why the need for strong strategic credit management was seen to be a crucial theme throughout our survey across the region's major economies.” The credit insurer said severe warning signs of a mounting strain on business liquidity are evident in the 60% increase in B2B bad debts that could not be collected, compared to its survey in 2021. Business were polled in seven markets in Asia (China, Hong Kong, India, Indonesia, Singapore, Taiwan and Vietnam), plus the United Arab Emirates, for the survey. Taiwan had bad-debt write-offs nearly three times higher than found in Atradius’s last survey of the market, now at 8% of the total value of B2B invoices. Businesses in Hong Kong and Singapore reported seeing an average 50% increase, while Indonesia reported a 40% increase in write-offs. A further worry for companies in the current challenging economic and trading circumstances is the difficulty of recovering profits when they are experiencing a high impact from write-offs. The Atradius survey in Asia revealed that 20% more companies than in the previous year reported an increased willingness to extend credit to B2B customers. “This is a signal that current market conditions are very competitive and that businesses struggle to get the additional sales revenue that would make good the losses from write-offs,” said Atradius. The survey also found that a serious concern for companies in the months ahead is the ability to keep pace with demand (33%) as well as resilience of demand from B2B customers (25%). Atradius said: “All of this has sparked increased awareness among most businesses polled about the importance of strategic credit risk management in B2B trade, with one in two companies across the markets polled expressing interest in insuring B2B trade receivables to mitigate the impact of customer credit risk on the business.” Roeland Punt, Atradius regional sales director for Asia, added: “Given the ongoing uncertainty in the market, we don't expect the bad-debts trend to recover quickly. The anxiety about the longer time it takes business to collect overdue payments from B2B customers remains acute. The credit management processes of companies will be put to the test, and those businesses which have a flexible and holistic approach to the issue will be better well placed to navigate the troubled waters that may lie ahead.”

Asia sees major increase in bad-debt write-offs, says Atradius

Want to read this article?

Read Next

Howden Tiger says property cat reinsurance market hardening at quickest pace since 1990s

Insufficient capital in cyber insurance market, says Gallagher Re

Hong Kong insurers see first quarter rise in general insurance premiums

EU Parliament adopts directive to stop environmental and human abuse

Berkley forms new excess specialty business

Howden Tiger says property cat reinsurance market hardening at quickest pace since 1990s

Insufficient capital in cyber insurance market, says Gallagher Re

Hong Kong insurers see first quarter rise in general insurance premiums

EU Parliament adopts directive to stop environmental and human abuse

Berkley forms new excess specialty business

Want to read this article?

Read Next

Howden Tiger says property cat reinsurance market hardening at quickest pace since 1990s

Insufficient capital in cyber insurance market, says Gallagher Re

Hong Kong insurers see first quarter rise in general insurance premiums

EU Parliament adopts directive to stop environmental and human abuse

Berkley forms new excess specialty business

Related Articles