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Late payments increase in US, Canada, Brazil and Mexico

The vast majority (93%) of companies in the Americas (NAFTA and Brazil) say they have experienced late payment from B2B customers in the past year, according to the Payment Practices Barometer survey conducted by Atradius.

Several highlights from the report – available here – include the following:

1. Trading on credit

All the countries surveyed (Brazil, Canada, Mexico and the US) are experiencing rising insolvencies and this is changing the way suppliers are protecting their businesses against the risk of payment default by their business-to-business (B2B) customers purchasing on credit. The following graphic shows that all four countries transact more than 40 per cent of their total B2B sales on credit terms. Mexico is the least likely country in the group to trade on credit while the Americas have a higher overall level of trade done on credit (43 per cent) compared to Europe (41 per cent).

2. Americas more exposed to payment risk

More than 47 per cent of the total value of domestic B2B sales on credit was paid late – an increase from 46.1 per cent in 2015. This compares to 41.6 per cent of payments in Europe. The survey report notes that foreign late payment account for just under half (49.6 per cent) of the total value of export sales on credit, compared to 38.9 per cent in Europe. This suggests that “businesses in the Americas are notably more exposed to payment risk arising from B2B trade than businesses in Europe”. The graph below shows the average payment term for each of the four countries plus a comparison with Europe.

3. Major challenges for business profitability

The graph below shows the main challenges facing businesses and how much each one affects profitability. We see that maintaining an adequate cash flow is the main problem for companies in the US, Canada and Mexico (21, 19 and 21 per cent respectively). Cash flow is less of a problem for Brazilian companies (13 per cent) and those in Europe (17 per cent). European companies see cost containment as more of a challenge, while Brazilian companies are affected more by falling demand for products and services. Bank lending restrictions is seen as a hindrance to profitability by 18 per cent of Mexican businesses, while 17 per cent of companies in Canada see the collection of outstanding invoices as a challenge.

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