Asia businesses struggle to offset losses from increased B2B bad debt, Atradius survey reveals

Alarming 60% increase in business-to-business (B2B) write-offs expected to pose a severe threat to liquidity of companies in Asia.

AMSTERDAM, June 28, 2022 /PRNewswire/ -- 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 to offset their losses and thus avoid putting liquidity under pressure and a company's entire 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 that could not be collected, compared to our survey in 2021. This is the major concern spelled out by businesses polled in seven markets in Asia (China, Hong Kong, India, Indonesia, Singapore, Taiwan, and Vietnam) and in the United Arab Emirates for the 2022 edition of the Atradius Payment Practices Barometer Survey for Asia.

Taiwan sounded the highest alarm, with a bad debt write-offs figure nearly three times higher than found in our past survey of the market -- now at 8% of the total value of B2B invoices. Businesses in Hong Kong and Singapore also said they were taking a serious hit from increased write-offs, both seeing an average 50% increase. Another country suffering was Indonesia, with a reported 40% increase in write-offs. Vietnam was included in the survey for the first time and companies there said liquidity was being dented both by write-offs (at 6% of the total value of B2B invoices) and unpaid B2B trade debt, which was affecting around half of the B2B 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. The Atradius survey in Asia reveals that 20% more companies than in the previous year reported an increased willingness to extend credit to B2B customers. This is a signal that current market conditions are very competitive and that businesses struggle to get the additional sales revenue that would make good the losses from write-offs. The survey also found that a serious concern for companies in the months ahead is the ability to keep pace with demand (33%) as well as resilience of demand from B2B customers (25%).