Payment punctuality in Romania slightly decreased / Payment deadline extensions suggest late-paid invoices will increase/ Temporary cash flow problems – the main reason for default payments/ Increase of companies who collaborate with external debt collection specialists/
Bucharest, 28 September 2016 – In 2015 payment behaviour in Romania significantly improved compared to the previous year, however in 2016 we see a break in this positive trend. At the moment, 73% of invoices issued are being paid on time, which is equivalent to a decrease of 2 percentage points over the previous year. At the same time, companies are extending their payment terms for both their B2C and B2B clients.
These are some of the insights from the representative EOS Survey „European Payment Practices 2016”, in which market research institute TNS Infratest polled 3000 decision makers from 14 European countries.
One reason for the slight decrease in the Romanians’ payment punctuality may be the extent of the payment deadline. At present, payment deadlines are longer than in 2015: 62% of B2B clients receive payment deadlines of at least 40 days, compared to 48% last year.
“Comparing the results from our surveys in the past years, we realized there is a correlation between payment terms and payment discipline,” says Georg Kovacs, Managing Director at EOS KSI Romania. “Although one might think that the percentage of on-time payments would increase through longer payment periods, according to our analysis, customers seem to delay payment further beyond the deadline. There is no longer the feeling of urgency and the customers forget about paying the invoices. In future, customers will be even less punctual on paying their invoices if this trend toward extending deadlines continues. Our recommendation is, therefore, that companies give their customers shorter payment terms”, says Mr. Kovacs.
In terms of bad debts, the level remains the same in 2015. „4% default of payment represents a negative impact on the Romanian economy” says Georg Kovacs. „The value is almost as high as in Greece (5%), where we know there is still economic instability and companies in particular are facing a rise in unrecoverable receivables and late payment of invoices”.
The average value of late payments in Romania has increased from 21% in 2015 to 23% at present. Romanian companies consider that the main causes of inappropriate payment practice for B2B clients are temporary cash flow problems (54%) as well as outstanding payments from own customers (41%). Regarding B2C customers, they pay late or default in payment due to unemployment (45%), cash-flow problems (32%) and excessive debt (31%).
As the EOS survey shows, due to the delays in the payment chain, companies are suffering a lot from profit setbacks (41%) and lack of liquidities (33%).
More than half of the Romanian companies that participated at the survey manage their receivables internally and about 14% of B2C companies do not use a standardized receivable management processes. However, in 2016, significantly more companies started to cooperate with service providers for their receivables management, compared to 2015. „More and more Romanian companies trust in the debt collection industry. 36% of them consider that the most important benefit of collaborating with debt collection specialists is securing their cash-flow, which allows them to focus on their core business,” says Georg Kovacs.
Concerning the future trends in payment practices, almost half of the Romanian companies polled expect that in the next 2 years there will be no changes in payment practices of their own customers, whereas almost 30% of them expect an increase of on-time payments.
The EOS Survey ‘European Payment Practices’
In spring 2016, in cooperation with the independent market research organisation TNS Infratest, the EOS Group asked a total of 3,000 companies in 14 European countries about prevailing payment practices in their respective countries. 200 companies in each country (the United Kingdom, Spain, France, Austria, Greece, Romania, Russia, Slovakia, Bulgaria, Poland, Hungary, Croatia and Belgium) and 400 companies in Germany answered questions on aspects of their payment experiences, economic trends in their home country and risk and receivables management in general.