More firms are waiting for late payments
March 31, 2014 Category Finance, Weekly
More than 80% of Chinese firms selling on credit have had to lengthen payment deadlines and increasingly write off missed payments as bad debt, says a report by Coface that shows a worsening trading environment is affecting corporate profitability. The decline in settlements is having a ripple effect across small and medium-sized enterprises (SMEs) and affecting the shadow banking sector. The number of firms waiting more than 120 days for payment more than doubled from 5% in 2012 to 11.4% last year, said the report. About 81.9% of the nearly 1,000 firms surveyed experienced overdue payments last year, compared with 77.2% in 2012. Overdue payments represented an ever-higher percentage of turnover, and if a bill was not settled within 180 days, there was an 80% chance it would not be paid at all. The worst-affected sectors are household electronics, chemicals and industrial machinery. Eighteen months ago, a firm would wait an average three to six months for receivables. Now it was six to 12 months, FTI Consulting Managing Director Bill Sims said. He suggested to ask for more money in advance when selling products to mitigate the risk. Eric Sun, Managing Director of household electronics firm Kinox said department stores were doing whatever they could to delay payments, and suppliers were waiting at least four to five months for payment, the South China Morning Post reports
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