Increasing bad debt losses hit the various industry sectors differently
- A survey of almost 10,000 businesses across Europe shows significant differences in how industry sectors are hit by bad debt and late payments. This is reported in the European Payment Index 2013 Industry White Paper.
- As a whole EUR 350 billion i.e. 3.0 percent of all business transactions made in a year had to be written off as a consequence of late or non-payment.
- Among the worst hit industry sectors are the Construction industry, the Healthcare industry, the Professional Services industry and the Media industry where bad debt losses continue to rise.
- The steepest increase in bad debt losses are seen in the Media and Business Services industries, up 25% and 19% respectively compared to 2012.
European Businesses were forced to write off a record total of € 350 billion or 3.0 percent of all transactions made in 2012 as a consequence of late or non-payments. Money that could be used to invest in innovation, job creation and expansion. The European Payment Index 2013 Industry White paper also shows that this burden is not spread evenly across the different industry sectors – Professional Services (for example accountants, actuaries, architects, recruiters) being hit the hardest with a level of bad debt losses of 4.5 percent.
"Late- and non-payment has reached such dire proportions that it represents a major obstacle to a sustainable economic recovery in Europe. Suffering from seriously delayed payment and banks unwilling to lend leaves many smaller firms little room to put their finances into shape as their liquidity shrivels at unprecedented speed,” says Lars Wollung, President & CEO of Intrum Justitia.
In this years’ EPI 2013 survey the Construction & Building industry, the Media industry and the Education industry have to write off well above average, whilst Utilities, Transportation and Manufacturing are doing better than the average. Last year the Healthcare industry showed the steepest increase in bad debt having to be written off, a trend that continues with a 7 percent increase to a level of 3.5 percent, however with some signs of long-term improvement.
“While the level of bad debt losses in the Health care industry has continued to rise this year, the pace is lower and we see that the sector as a whole waits fewer days to hand over a claim that has fallen due, to a professional partner. Also a larger share of the respondents do use professional partners to deal with the problem of late payment. These are encouraging signs, says Lars Wollung.
The highest increase in bad debt loss is seen in the Media industry where 3.5 percent of all transactions had to be written off as payment loss, an increase of 25 percent. The media industry does not show any further positive numbers, 63 percent of the respondents mentioned loss of income due to late payments and 58 percent mentioned to have liquidity problems. As much as 54 percent predict payment risks from their debtors for the coming 12 months. Overall this industry paints a worrying picture for the months to come.
”Although the picture painted in our report may seem troublesome there are measures companies can take to protect themselves. There is a lot that can be done to help the businesses in boosting their results. We see that businesses that know their customers and implement efficient credit policies get paid earlier and have to write off a smaller percentage off sales, comments Lars Wollung.”
To get the European Payment Index Industry White Paper 2013 in full, please visit us at www.intrum.com.
How can you boost your company? Lars Wollung, CEO & President Intrum Justitia, advices:
- Create, continuously develop and implement a balanced and solid credit policy to manage your risks and growth.
- Measure and follow up on the capital employed in your credit management process to reduce cost of capital.
- Make sure you identified the customer you are doing business with.
- Make a clear agreement with your customer stating all conditions for your business.
- Integrate sales, marketing and financial department, and ensure an efficient invoicing process to avoid defaults.
- Implement customer address checks regularly.
- Monitor economic and industry information, as well as the solvency of key customers.
- Reduce your loss of customers and strengthen your customer relations by customizing your credit process based on payment behavior and ability to pay.
- Implement swift reminders and charge default interest when possible.
- Balance your customer structure based on risk and growth potential.
- Always take immediate action to get paid.
For more in depth info go to www.intrum.com.
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 3,500 employees in 20 countries. Intrum Justitia AB has been listed on NASDAQ OMX Stockholm since 2002. For further information, please visit www.intrum.com.
About the European Payment Index 2013 Industry White Paper
The survey was conducted simultaneously in 28 countries earlier in 2013. The survey was conducted in written form and almost 10,000 companies responded. The questionnaire was translated into the respective national languages. Dispatch and return of the questionnaires were carried out on a decentralized basis by the countries concerned, whereas the analysis was carried out centrally in accordance with predetermined guidelines. All information has been verified and uncertainties were not included in the evaluation. Companies in England, Wales, Scotland and Ireland were questioned online by a specialized company (BING Research).
For further information, please contact:
Annika Billberg, IR & Communications Director
Direct: + 46 8 546 102 03
Mobile: + 46 702 67 97 91
E-mail: a.billberg@intrum.com
Madeleine Bosch, Group Marketing Manager/ Head of EPI Research
Mobile: 0031 64 6212 579
Email: m.bosch@intrum.com