Europe’s record high unemployment fuelled by late payment say business managers

• 40 per cent of European businesses managers say late payments contribute to them not hiring, while one out of four European companies say the consequences of late payments include having to dismiss employees, according to Intrum Justitia’s European Payment Index 2014 (EPI 2014).

• The total bad debt loss for European businesses has risen further from 3.0 to 3.1 per cent of revenues, roughly equaling the cost of 8 million jobs.

• Nearly three out of four companies in Europe (72%) claim not to have felt any positive impact from economic recovery, while a majority of respondents in all 31 countries surveyed insist they have yet to see any change in the general economic environment. 

A stunning 55 per cent of all 10,000 businesses taking part in EPI 2014 say they are suffering as a result of late or non payment of bills and invoices. This is the highest percentage in the history of the European Payment Index with 36 per cent of business respondents believing that their very survival is being threatened by late payment and every second company saying that it prohibits growth.

Even in Germany, Europe’s larger economy, businesses said they are now suffering hard from lack of liquidity. Some 35 per cent of the  German companies said that late payments have a strong impact on steering the need to layoff people. The picture is the same elsewhere with some 30 per cent of UK companies, 28 per cent of companies in Spain and 25 per cent in France reporting the same correlation.

Despite all the talk of an end to recession, the total bad debt loss in Europe has risen further from 3.0 to 3.1 per cent of total revenues, equaling to a total of 360 billion euros for all businesses in Europe. That amount is, in turn, roughly equivalent to 8 million jobs. Every year for the past eight years, the bad debt loss percentage has risen for European businesses.

- Imagine if European companies had those 360 billion euros they now need to write off on a yearly basis, to invest in their businesses! If all bills also were paid on time that would add further jobs to our economy. That is why companies’ credit management is a key to a sound economy. We would all be better off if bills were paid on time, says Lars Wollung, President & CEO of Intrum Justitia.

- Late payments accelerate a negative chain reaction for business where lack of liquidity forces downward measures in a degree rarely acknowledged. Hardest hit by the problem of illiquidity are small and medium enterprises, that is those firms that account for the main part of growth, explains Lars Wollung.

Few experience a recovery

Very few of the European business leaders surveyed in the 2014 EPI see signs of recovery. 72 per cent of the respondents said that they have felt no positive impact of an economic recovery in the last three months. And that lack of hope goes for a majority of respondents in all 31 countries. In Iceland only one per cent and in Sweden two per cent of the business managers say they have felt any positive impact of a recovery. The lack of positive signs goes for Hungary, two percent, and Serbia, three per cent, where business managers said that they have felt any positive impact. While business leaders in Lithuania, where 44 per cent said that they have seen signs of economic recovery, are more positive. In Denmark 37 per cent, The Netherlands 36 per cent, Estonia and Spain both 30 per cent said that they felt signs of a general economic recovery.

In the report Intrum Justitia lists what measures businesses can take in order to improve their cash flow and prevent bad debt losses:

1. Create, continuously develop and implement a balanced and solid credit policy to manage your risks and growth
2. Measure and follow up on the capital employed in your credit management process to reduce cost of capital
3. Make sure you know the customer you are doing business with
4. Write a clear contract with your customer stating your terms of business
5. Integrate sales, marketing and financial departments, and create an efficient invoicing process to avoid defaults
6. Monitor economic and industry information, including solvency of key customers, and regularly check customer addresses
7. Reduce customer losses and strengthen customer relationships by tailoring your credit process based on payment behavior and ability to pay
8. Implement swift reminders and charge default interest when possible
9. Balance your customer structure based on risk and growth potential
10. Act immediately to get paid, don’t delay

Click here to access the full report, with detailed statistics and a video with comments by President & CEO, Lars Wollung >>

About Intrum Justitia

Intrum Justitia is Europe’s leading Credit Management Services (CMS) group and offers services designed to measurably improve clients’ cash flows and long-term profitability, including purchase of receivables. Founded in 1923, Intrum Justitia has some 3,600 employees in 20 countries. Consolidated revenues amounted to around SEK 4.6 billion in 2013. Intrum Justitia AB has been listed on NASDAQ OMX Stockholm since 2002. For further information, please visit www.intrum.com.

About Intrum Justitia European Payment Index

The survey was conducted simultaneously in 31 European countries plus Turkey and Russia between January and March 2014. The survey was conducted in written form and more than 10,000 companies responded. The questionnaire was translated into the respective national languages. Dispatch and return of the questionnaires was carried out on a decentralised basis by the countries concerned, whereas the analysis was carried out centrally in accordance with pre-determined guidelines. All information has been verified and uncertainties were not included in the evaluation. Furthermore, all anonymously sent questionnaires were not taken into account for the final evaluation. Companies in UK, Ireland, Greece, Cyprus, Lithuania, Latvia, Serbia, Bosnia, Russia and Turkey were also questioned on-line by a specialised company (BING Research).

For further information, please contact:

Lars Wollung, President & CEO

Tel: + 46 8 546 102 02

Madeleine Bosch, Head of EPI Research, Intrum Justitia
Mobile: +31 64 6212 579
Email: m.bosch@intrum.com