The number of companies struggling with payment backlogs is increasing, according to the “SME Scanner” survey for Q1, carried out for BIG InfoMonitor. The transport sector is the unwelcome protagonist of the increasing problem with debt collection. The situation in trade also continues to be poor. When there is no money in the cash register, it is difficult to pay off one’s own liabilities. Arrears in transport increased by almost one fifth in the past year, and in trade by 8 percent. At the end of last year, overdue liabilities of 319,000 companies to suppliers and banks amounted to over PLN 41.8 billion according to data from BIG InfoMonitor’s Debtors Register and BIK.
For several years now, businesses have faced a higher than usual bar. Just to illustrate, last year a record number of over 4,200 company restructurings were announced, equalling the total for the previous two years. An unprecedented number of nearly 250,000 companies were also suspended, 61 percent more than a year ago and more than double the number before the pandemic, according to data from Dun&Bradstreet.
The prolonged difficult conditions for conducting business activity impact the quality of B2B settlements. According to the latest “SME Scanner” survey conducted in the first quarter of this year, everyone who trades with a deferred payment deadline has insolvent payers. There’s no correlation between the type of activity undertaken and the size of the company. Digging deeper, over half (53%) of the SME sector had clients who settled outstanding bills over 30 days late in the last three months, and 40% of 500 polled micro, small, and medium-sized businesses had delays exceeding 60 days.
Analysis of cyclical data gathered for BIG InfoMonitor suggests that the positive trend in B2B settlements observed last year was interrupted. Compared to Q4 last year, significantly more businesses are struggling with delays exceeding one and two months (by 6 p.p.). However, on the positive side, the situation still looks a bit better than at the beginning of last year, when not 40% as it is today, but nearly half of the companies had payments delayed by over 60 days. A year ago, trade companies were the hardest hit by insolvent contractors. Currently, the transport industry is experiencing the worst of it. 54% of these companies have clients who don’t want to pay beyond 60 days from the designated deadline.
In trading, 49% of companies have insolvent clients. Over the last 12 months, there has been consistent and significant improvement in the payments of goods’ recipients from manufacturing companies. The problem of insolvent payers has been reported by 27% of enterprises, almost half less than a year ago. This is likely due to the improvement of the economy in the manufacturing industry. The PMI index from August 2022 to February rose from 40.9 to 47.9 points, according to Sławomir Grzelczak, CEO of BIG InfoMonitor.
The situation is different in the transport industry, which experienced a double-digit percentage decrease in demand for its services last year. At the same time, it is struggling with unequal competition from companies from Ukraine (which are also being set up across the eastern border by entrepreneurs from Western Europe*). Grzelczak adds, “Polish transport companies are taking on increasingly risky orders without considering the certainty of receiving payment. This is also seen in trade which experienced a decline in retail sales last year. Unfortunately, efforts to maintain results compel some entrepreneurs to build a competitive advantage by offering long deferred payment terms and turning a blind eye to delays. This however has bitter consequences.”
Although the problem of delayed payments from transport clients has swollen recently, last year’s TSL arrears for invoices and loan installments were among the fastest-growing in the industry. With a general market increase of 6 percent, their value rose by 18%, reaching almost PLN 3.1 billion. In trade, which also had a difficult year, arrears increased by almost 8% to PLN 8.8 billion.
In companies where customers do not pay on time or at all, there is often a problem with settlement of own liabilities. Other entities are then infected with problems and payment blockages affecting a chain of interconnected enterprises emerge. 43% of the surveyed SMEs note that unpaid liabilities in due time significantly hinder business operations. Outstanding payments imply problems with settling their own liabilities and lowering financial liquidity. Other consequences include the need to block investments, higher operating costs due to the need to undertake recovery actions. As the SME Scanner survey shows, the effects of clients’ payment negligence are felt most strongly by the smallest companies, employing up to 9 people, and the service sector, where there are many micro-companies.
“While running a business, it is necessary to minimize the risk associated with deferred payments. It is essential to carefully and wisely choose business partners. It’s worth checking their payment reliability, also in the BIG register, where creditors report unreliable debtors, just to warn others against them.” advised Sławomir Grzelczak.
