US: DSO worries prompt strategic credit management

Introduction

The 2022 edition of the Atradius Payment Practices Barometer survey findings for the US is a valuable opportunity to hear directly from companies about how their business operations are coping with the disruptive impact of the current challenging economic and trading circumstances.

Topics covered include: payment terms set for business-to-business (B2B) customers, the average time it takes to turn overdue B2B invoices into cash, the impact of late or non-payment on the business, and expected challenges to profitability during the coming months.

The survey questionnaire was completed by businesses in the US during Q2 2022. Responses given by companies polled are contained in the report for the US, which is part of the June 2022 edition of Atradius Payment Practices Barometer for the USMCA: soaring inflation prompts liquidity protection.

Key takeaways from the report for the US

Companies battle to solve payment default troubles

• Customer payment default remains a major headache for US companies polled in our survey. A vast increase was reported in businesses seeking external financing to ease liquidity issues caused by late payments. The response of many companies was also to devote more resources, manpower and costs to the issue, and one outcome of this policy was a slight fall in the level of bad debts written off as uncollectable.
• Our survey found that many US businesses set tighter payment terms for B2B customers amid rising appreciation of the risks of trading on credit. We found a focus on the policy of offering discounts for early payment of invoices, as well as far more regular credit checks on customers. Some companies polled set aside funds to cover bad debt losses, although this had a downside risk of potentially hurting growth. The value of having credit insurance cover was widely reported.

Strategic credit risk management crucial amid DSO worries

• A proactive approach to the issue of strategic credit risk management was a clear finding in our survey, prompted by many factors including a deterioration in Days-Sales-Outstanding (DSO) for one third of US companies polled across all industries. The increased desire to use credit insurance was motivated by benefits such as being able to access in-depth information about the payment history of customers and regular market intelligence. Businesses also reported that it helped them to improve DSO and free up working capital.
• Companies polled in the US expressed confidence for the future, telling is they expected an improvement of B2B payment practices and also a strong expansion of trading on credit. A generally positive outlook was found in the survey, but some concerns were reported for the period ahead. There was particular anxiety about a potential deterioration of DSO, as well as worry about keeping pace with rising demand, the ongoing effect of the pandemic on the economy, and about maintaining adequate cashflow.

Key survey findings for the US

• Widespread B2B trading on credit, winning new customers the focus
• Tighter payment terms reflect credit risk concern, insurance cover valuable
• Staggering rise in companies chasing external finance to ease liquidity troubles
• Customer payment default mainly due to admin headaches
• Rigorous customer checks and increased discounts boost credit management process
• Business confidence strong, positive outlook for B2B trading on credit
• DSO worsening expected amid concern about coping with extra demand

Interested in finding out more?

Please download the complete report for a complete overview of the payment practices in the US and in the following local industries:

• Agri/food
• Chemicals/Pharma
• Electronics/ICT
• Steel/Metals