Inflation, high costs of materials and energy, and sales decline have been the three biggest challenges for micro, small and medium enterprises (MSMEs) for over a year. Additionally, it has also become troublesome to secure new employees, find new markets and pay their dues on time. One in five entrepreneurs admits that unpaid invoices from their customers forces them into debt. According to data assembled in the BIG InfoMonitor Debtor Register and BIK (Bank Information Base), where total corporate arrears have increased by PLN 3.2 billion in a year and exceeded a record PLN 44.4 billion at the end of June. Problems with delayed B2B settlements are growing in the TSL (Transport, Shipping, Logistics) and retail sectors. The situation is also getting worse in services.
In the third quarter of this year, more than 53% of companies reported invoices delayed by more than a month, and over 34% indicate that their customers delay payment by more than two months. As a result of these delays, every second business which has frozen invoices acknowledges that unpaid obligations of their customers influence their own business condition. The money frozen in invoices primarily makes it difficult to pay their own liabilities on time, which 37% of businesses complain about. These issues affect companies in the industrial (46%) and trade (42%) sector and employ 50-249 people (41%) the most.
Frozen assets represent higher operational costs for one in three businesses due to the cost of debt being collected, and precious time is lost in the business world. This aspect is complained about more often than remaining industries in trade (49%) and the service sector (46%). Blocked finances also mean suspended investments, usually mentioned by every third representative of trade and industry.
There was an increase in the number of companies reporting regular losses due to non-recovery of part of delayed invoices (29%) and threatened disbursements (24.6%). One in five entrepreneurs admits that unpaid invoices force them to take out additional loans and lead to debt spirals, which is mostly complained about by the trade sector (35%).
Consequently, there are more companies with problems, which is confirmed by data gathered in the BIG InfoMonitor Debtors Register, showing a delay in the repayment of current bills and invoices to customers and in the BIK (Bank Information Base), which also contains data of unpaid credit obligations on time. According to data visible in both bases, there are nearly 324,000 debtor companies, meaning that 5% of businesses from various market sectors are already entered in the BIG InfoMonitor Debtors Register and do not repay loans, as recorded by BIK.
The debt of companies delayed above 30 days and at least PLN 500, at the end of the second quarter of this year, exceeded a record 44.4 billion PLN. This means that since June last year, creditors have added over 8,000 companies with problems repaying current bills, loans, and invoices against customers, and the total debt increased by PLN 3.2 billion.
Trade, industry and construction are the sectors with the biggest arrears.
Long-term delays in repaying obligations by customers put the trading industry into growing debt. The accumulated debt of companies in this sector, visible in the BIG IM and BIK, is already close to PLN 9 billion and concerns over 74,000 entities (5%). In a year, the value of unpaid obligations increased by PLN 282 million (3%).
A slight improvement can be seen in the construction sector where arrears reduced by PLN 431 million (-7%) to nearly PLN 5.8 billion. However, in this case, we observe an increase in the number of dishonest entrepreneurs – by 923 to 51,214 and they constitute 5% of companies with problems in this industry.
The condition of the TSL (Transport, Shipping, Logistics) sector is the worst. In just one year, overdue loan and non-loan obligations increased by nearly PLN 483 million (17%) to PLN 3.3 billion. The number of companies having problems with paying their obligations on time is also growing – by 1,755 to the level of 38.6 thousand. The very high percentage of debtors, which is as much as 9%, is also alarming for the whole sector. This means that almost every tenth transport company is in serious financial trouble and there is a higher risk of working with them.
Unattractive statistics are also presented for the service industry, whose debt is already nearly one billion zlotys (PLN 992 million), which means an increase in debt by PLN 244 million (33%). This state is now due to 9.2 thousand entities – 861 more compared to the same period last year.
The only sector where both debt and the number of debtors have decreased in the last year is industry, although the total debt value of companies in this sector leaves a lot to be desired – PLN 7.1 billion. However, we record drops here – in the value of debt by PLN 102 million (1.4%) and the number of debtors by 29 entities.
“The examples of sectors with the highest arrears show how important it should be for entrepreneurs today to check future business partners and to constantly monitor payments. This allows control over financial liquidity and over the timeliness of repayments made by business partners, which ultimately can limit the scale of payment congestion. By using the option to monitor customers, we receive an alert on the mail when someone adds new information about the verified company to our BIG InfoMonitor register. There are three key benefits from this. First – the entrepreneur receives an email notification if there is a positive or negative entry for the company they have specified. Secondly – they will be able to react when their customer has debt and is entered into the debtors register and will verify the cooperation conditions with such a customer on time. Thirdly, they will have information about debtors before others and will protect their business more effectively,” emphasizes Sławomir Grzelczak, President of BIG InfoMonitor.
Overarching company challenges
As shown by the MSP Scanner study conducted for BIG InfoMonitor in the third quarter of this year, more respondents than last year confirmed that their current challenge remains finding new employees (19% vs 10%), looking for new markets (17.4% vs. 10.6%) and paying obligations on time (13.8% vs. 5.6%).
However, each sector has different needs and challenges. The increase in the cost of running activities is the biggest pain for service companies, as indicated by every second one. High costs of materials and energy primarily hit the industry (44%). The decline in sales is mainly complained about by construction (28%), services and trade – 24 and 21% respectively. The problem with finding new employees is more often reported by the industry, services and transport. About the margin decline, trade (17%) and services (11%), and about problems with suppliers, industry (14%).
“One thing is certain. Some companies have not fully recovered after the pandemic, inflation made the situation more difficult along the way, and finally, some were devastated by the war in Ukraine. Inflation, high costs of materials, energy and sales drops – starting from 2023, this will be the biggest challenges for micro, small and medium firms, as indicated by 41%, 36% and 21% of entrepreneurs in our survey, respectively. Trading companies suffer due to intense competition and a decrease in consumption. Construction and industry are struggling with rising energy, material and semi-finished product prices, and in transport, costly regulations and the crisis in the road transport market are added on. Currently, the conditions for conducting business activities are further worsened by the flood disaster, which is already reported by entrepreneurs from the affected regions, especially from the hotel and catering industry,” emphasizes Sławomir Grzelczak, President of BIG InfoMonitor.
Source: “Skaner MSP” survey conducted among micro, small and medium enterprises, conducted by the Institute of Research and B2B Solutions Keralla Research, on a sample of 500 selling companies with deferred payment term, telephone interview technique, 3Q 2024.
Source: https://ceo.com.pl/inflacja-koszty-i-zatory-platnicze-najwieksze-wyzwania-msp-w-2024-roku-18109
