Atradius highlights shifts in B2B payment practices among Australian businesses

Atradius, which provides trade credit insurance and debt collection solutions, has published its Payment Practices Barometer 2024.

The report details significant shifts in business-to-business (B2B) payment practices among Australian companies.

Australian businesses’ response to changing economic conditions in 2024

The findings from this early 2024 survey highlighted strategic adjustments made by businesses in response to changing economic conditions and finance landscapes.

Atradius's Oceania head of client services, Joe Lewis, focused on the impact of heightened interest rates on corporate finance.

“Based on Atradius’s research, there has been a significant impact of rising interest rates on an organisation’s borrowing. With a sharp decline in borrowing capacity, 59% of companies have pivoted away from traditional bank loans to instead prioritise trade credit, which has risen by 35%,” he said.

He also pointed out that companies are strategically extending payment terms and increasing credit limits to better support their customers’ liquidity.

“It’s clear that businesses are under increasing pressure to fund their customers’ short-term cash flows through extended payment terms and higher credit limits. Understanding the shift towards more flexible payment practices and the strategic use of trade credit is essential for organisational leaders looking to manage their cash flow effectively and mitigate financial risks,” he said.

Credit risk environment in 2024

The survey revealed a complex credit risk environment with several key findings:

• Trade credit use has expanded significantly as an alternative to conventional banking, showing a 35% rise.
• Average payment terms across industries have lengthened by nearly two weeks, now standing at 35 days post-invoicing.
• Consistent levels of bad debts are observed, making up 7% of all B2B invoices, while late payments affect 45% of credit transactions.
• Requests for repayment plans have surged, with 64% of companies noting an increase, underscoring heightened liquidity concerns.
• Despite the challenging economic climate, 55% of respondents anticipate no increased risk of insolvency within the next year.

“As organisations in Australia and around the globe continue to adapt to a rapidly changing economic environment, strategic credit management becomes even more important. Companies that are proactive in adapting their payment practices and credit management strategies will be better positioned to navigate the uncertainties of the market and capitalise on growth opportunities,” Lewis said.