More than one third of invoices in the agri-food industry were paid late, and over half of transactions were on credit last summer, as businesses tried to manage liquidity problems, new data from Atradius has found.
A survey carried out by the credit insurer between May and July of 2022 found that within western Europe, 51% of business-to-business transactions were on credit, which suppliers offered to boost growth and attract new customers.
However, this trend presented a threat to suppliers’ cashflow, and 40% of companies polled stated that they would consider taking up credit insurance in the year ahead to minimise this risk.
Administrative delays also became a problem for companies as more time and resources were spent on processing late payments and resolving unpaid invoices.
“There’s no doubt that it has been a challenging year for the agri-food industry after the knock-on effects of both Brexit and the Covid-19 pandemic, and it’s likely the sector will face ongoing challenges as we look forward to 2023,” said Tony Gordon, senior risk manager at Atradius Ireland.
“With insolvency a real risk, businesses need to do all they can to ensure they are protecting cashflow so they can mitigate the risk of a large customer failing unexpectedly.
“Payment defaults have a domino effect on supply chains, but this is where trade credit insurance is vital as it allows firms to protect the bottom line, and support them through the uncertain and unpredictable times,” he added.
The global economic downturn due to increasing energy prices, input costs and commodity prices, as well as supply chain interuptions and geopolitical tensions has become a key concern for agri-food businesses in Ireland, according to the report.
Other key concerns for businesses over the coming year include lasting impacts from the pandemic and Brexit as well as a slow rebound of certain industries.
While, there is some optimism for 2023, with 73% of Irish participants expecting an improvement in business growth, 69% expect a deterioration in their customers’ payment practices over the next year.