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Late payment is endemic worldwide: Who’s playing the invisible bank?

The latest Euler Hermes Economic Outlook report, "High Stakes Game - Payment Behavior, Cash Piles and Major Insolvencies" reveals that Chief Economist, Ludovic Subran believes that, “News are not great: the economic acceleration does come with disagreeable surprises. Turnovers are growing but so are input costs and the jaw effect on companies can be im- portant. Credit is still cheap but time has come to wean the private sector off abundant liquidity. And of course, when it comes to political risk, all bets are off.” No surprises with this summary, but in their report on payment behaviours the sad state of global business was shown.

Who’s Playing the Invisible Bank?

EH report that 45% of companies waited over 60 days to be paid:

Source & Copyright©2017 - Euler Hermes, Bloomberg 

Payment habits vary hugely between countries:

Source & Copyright©2017 - Euler Hermes, Bloomberg

China is by far the worst 89 average and 133 worst, while New Zealand is best at average of 42 days and a worst of 53 days.

EH also report that DSO change over the last two years varied by region:

Source & Copyright©2017 - Euler Hermes, Bloomberg

EH report that,”The average DSO of US listed companies has been remarkably stable at around 50 days over the past three years. It is the same story for Days Paid Outstanding (DPO) which has remained at around 34 days on average over the last ten years. As a result, Working Capital Requirement (WCR) figures do not show any risk of real de- generation in the U.S. However, this stability is masking some discrepancies and divergences across sectors.”

CTMfile take: These long DSO figures show why supply chain finance is needed world-wide. 

This item appears in the following sections:
Payments - Bill Collection
Accounts Receivable Management
Dynamic Discounting
Financing Short-Medium Term Deficits
Invoice Discounting & Securitization

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By Brian Shanahan on 13th Jul 2017:

Jack, While this report is an interesting read, there are a number of points that don’t make sense. Firstly, that Chineses terms are the longest. That would surprise me. I would have expected the answer to be North Africa or in the Middle East. Second, that that US pharma DSOs average at 64 Days. That is probably double what the real answer is for Pharma companies operating in the US through the major distributors. So the best I might offer on this report is that it may be directionally correct, but who can say when nothing is said about their data sources or methodology.

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