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8:31pm 28/06/2022
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Asia businesses struggling to offset losses from B2B bad debt

HONG KONG: Chasing down unpaid B2B trade debt has become a major headache for Asian companies trading on domestic and export markets.

They are facing sharply increased costs to manage customer credit risk in-house and thus protect cash flow from disruption caused by the current challenging economic and trading environment.

The problem becomes even more serious with long-term unpaid B2B trade debt (more than 90 days) that is written off as uncollectable despite several attempts to receive payment.

In this situation, businesses struggle to find additional sales, a measure that could help offset their losses and thus avoid putting liquidity under pressure and the company’s future at risk.

Severe warning signs of a mounting strain on business liquidity are evident in the staggering 60% increase in business-to-business (B2B) bad debts, according to the 2022 edition of Atradius Payment Practices Barometer Survey for seven Asian markets.

Taiwan sounded the highest alarm, with a bad debt write-offs figure at 8% of total B2B invoice value.

Businesses in Hong Kong and Singapore also said they were taking a serious hit from increased write-offs, both seeing an average 50% increase.

Indonesia reported a 40% increase in write-offs, while liquidity of Vietnam companies was dented both by write-offs (6% of total B2B invoice value) and unpaid B2B trade debt (around half of 2B trade value).

A further worry for companies in the current challenging economic and trading circumstances is the difficulty of recovering profits when they are experiencing a high impact from write-offs.

20% more companies than in the previous year reported an increased willingness to extend credit to B2B customers, showing that current market conditions are very competitive and that businesses struggle to get additional sales to make good the losses from write-offs.

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