In times of crisis, when the number of insolvencies is on the rise again and the economy is sluggish, companies focus on liquidity. „Cash is King“ is the motto. When managing outstanding balances, using longer payment terms as an argument for selling goods and services can be a balancing act between the requirements of sales on one side and liquidity management on the other.
During the Corona crisis, payment terms were significantly shortened. In the first half of 2024, customers and buyers were granted a time of 31.37 days until payment was due. Was it right to be more lenient with payment terms? Looking at the days of payment delays, it seems that longer payment terms do not extend payment delays. In fact, the payment delay in the first half of 2024 compared to 2023 decreased from 10.77 to 8.8 days.
This improvement is seen across industries. The construction industry improved from 15.49 days of delay to 14.77 days, while the chemical and plastics sector had a record low of 6.19 days in the first half of 2024 (compared to 8.75 days in the previous year). Some industries had over ten days of payment delays, including the basic materials industry, personal services, and transportation and logistics.
The total duration of the outstanding receivables is the sum of the granted payment term and the payment delay. In the first half of 2024, the average duration of outstanding receivables was 40.17 days, just a slight improvement from the previous year’s 40.70 days. Despite the overall economic crisis, the total duration of outstanding receivables has hardly changed.
The payment terms granted varied among industries. The chemical industry received 40.27 days (compared to 36.10 days in the previous year), the metal and electrical sector 36.90 days (compared to 35.80 days), and personal services 26.63 days (compared to 26.18 days in the previous year).
According to a survey by Creditreform Economic Research in the SME sector in spring 2024, 94.5 percent of SMEs reported that their invoices were settled within 30 days (compared to 92.5 percent in the previous year). Public authorities take longer to settle invoices, with only 83.8 percent paid within a month.
The average invoice amount has decreased from 2,234 euros in 2023 to 2,072 euros currently. This trend is evident across all industries, with varying average invoice amounts. The chemical and plastics industry has an average invoice amount of 4,048 euros (compared to 5,262 euros in the previous year), while personal services have an average of only 1,335 euros.
Despite these changes, the total amount of receivables has increased to 23,618 euros in 2024, around 1,700 euros more than a year ago. Failing to address long outstanding receivables can lead to unrecoverable losses. Faced with increasing payment defaults, it is crucial for businesses to manage their payment terms effectively to reduce the risk of financial losses.
