The negative GDP growth in the first half of 2023 and the unfavorable macroeconomic situation had a negative impact on the Polish economy over the past 12 months. Despite these difficulties, the average payment term for Polish companies in 2023 was 48.7 days, 3 days less than in 2022. Although this is the lowest it has been since 2020, when it was 48 days, experts are warning businessmen not to be overly optimistic. The 8th edition of the payment study conducted by Coface reveals that despite overall improvement, not all sectors reported shortened payment collection times.
The past year has seen an increase in the proportion of companies offering shorter payment terms. 44.9% of companies offered their customers repayment within 30 days (in 2022, this coefficient was 41.3%), and 31.1% within 60 days (in 2022, it was 28.7%).
– Compared to our previous study from January 2023, the share of terms not exceeding 90 days has slightly increased and amounted to 89.7%. Less than 1% of the companies participating in the survey offered payment terms exceeding 6 months – says Grzegorz Sielewicz, Chief Economist at Coface in Central and Eastern Europe. – It’s worth noting that payment delays have become a standard practice in Polish business. 49.3% of businesses experienced arrears in inflow payments from contractors in the last 6 months. However, this is a clear change compared to the 2022 study, when 61.2% of companies reported such delays – emphasizes the expert.
Payment Delays Depend on the Industry
The pharmaceutical industry recorded the shortest payment delays in 2023 (33 days). It was closely followed by the agriculture and food industry (38.8 days), which also saw the biggest reduction in payment delays – from 60 days in 2022 to 38.8 days in 2023. The trade sector recorded the third shortest payment terms (42.6 days). Meanwhile, the metallurgy and paper and wood industries recorded the most overdue payments (69.0 and 70.7 days respectively).
Significant shortening of the timeframe for settling payments is evident, among others, in the chemical industry (from 68.6 days in 2022 to 50.5 days in 2023). On the other hand, the energy sector struggled with a serious increase in delays. Payment arrears that amounted to 36.4 days in 2022, increased to 58.2 days in the past 12 months.
– The IT sector faced numerous problems, too (the payment period extended by 7.9 days compared to 2022). The industry continues to wrestle with a drop in disposable income of households, which focus on buying necessities, rather than durable goods such as electronics – says Grzegorz Sielewicz.
Payment delays have led companies to take measures to recover receivables. Mediation and arbitration were identified as the most effective methods in this regard by survey respondents (40% of responses), followed by monitoring and internal collection (36%) and external friendly or legal collection (24%).
Sentiments and Predictions for the Future
Most businesses (72%), both small, medium and large, expect that there will be no changes in the level of overdue payments in the next 6 months. 21% of the companies that participated in the Coface survey suspect the delays will grow, while 7% hope they will decrease. Respondents also predict that payment problems will particularly affect smaller contractors.
Comparing the 2023 payment survey with the 2022 edition, we can notice changes in the factors posing the greatest threat to business. A year ago, respondents most frequently pointed to higher energy costs, taxes and fiscal charges, and high labor and raw material costs. The current report states that the biggest obstacles to doing business are limited demand (44% of responses) and excessive competition (40% of responses), with taxes still being a problem (41% of responses).
– This time higher interest rates were not mentioned as a major obstacle for companies, which shows the relative resilience of businesses to external financing costs and the monetary easing that started in Poland in September 2023 – says Grzegorz Sielewicz. – Businesses in our country have relatively adapted to conducting business in the shadow of the war in Ukraine. Nevertheless, the economic and business consequences are still being felt by them – sums up the expert.
Waiting for Change
Economists predict that 2024 will be a time of economic growth, a hint of which was seen in the last months of 2023. Currently, almost a third of entrepreneurs have a positive outlook on the prospects for their business in the future. However, it should be remembered that companies continue to report many significant difficulties. High costs reducing margins, limited demand, and tax burdens are just some of them. Thinking about the newly started 2024, it’s also necessary to take into consideration the economic slowdown taking place in Western Europe.
