April MarketMonitor


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Every month, Atradius brings you an up to the minute snapshot report on a range of export markets and key trade sectors. Our underwriters have a specialist view of the world economy – and the
industries that make that economy tick - that you won’t find in the general press coverage of events.

Even more importantly, our underwriters use their expertise and experience to look to the future. In each edition of Atradius Market Monitor you’ll find our outlook for a number of key market economies.

In this issue…
…we feature the following markets:
The United Kingdom – with a spotlight on the metals and automotive sectors
Mexico – with a spotlight on manufacturing, construction and retail
South Africa

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April MarketMonitor

  1. 1. marketmonitor adapting to the challenging economic environment June 2009 The immediate outlook for key markets and sectors Every month, Atradius brings you an up to the minute snapshot report on a range of export markets and key trade sectors. Our underwriters have a specialist view of the world economy – and the industries that make that economy tick - that you won’t find in the general press coverage of events, so we hope that you will find our summary reviews a useful addition to your Atradius credit insurance. Even more importantly, our underwriters use their expertise and experience to look to the future. In each edition of Atradius Market monitor you’ll find our outlook for a number of key market economies. In this issue… …we feature the following markets: France – with a spotlight on the household appliances and dairy sectors Austria – with a spotlight on the paper and timber sectors Italy Norway Canada New Zealand Brazil Japan Special: Atradius Collections - Keep your cash flow healthy 1
  2. 2. Expected default in Western Europe and USA One of the most important factors that any business needs to know is the trend of insolvencies in their markets. The following Expected Default Frequency (EDF) chart is based on listed companies in the markets referred to, and the likelihood of default across all sectors within the next year. In this context, default is defined as a failure to make a scheduled payment, or the initiation of bankruptcy proceedings. Probability of default is calculated from three factors: market value of a company’s assets, its volatility and its current capital structure. As a guide, the probability of one firm in a hundred defaulting on payment is shown as 1%. Source: KMV Credit Monitor and Atradius Economic Research The deteriorating global economic environment has translated into an increase in insolvencies, while the heightened default expectation has been evident since mid-2007 (see chart above). In April 2009, the median EDF of nearly all major Western economies dropped compared to the previous month, albeit that these figures still remain rather high. Nevertheless, the US and the UK show a noticeable decrease since a peak in February 2009. More modest decreases are recorded for France, Germany and The Netherlands compared to the previous month. This general moderation is explained by the fact that most national stock indices have rebounded since the beginning of March: the general stock price level has increased across most markets and volatility has decreased. While this development is positive in principle, it still remains to be seen if this is a short-term trend or if it indicates the seeds of a long-term improvement. 2
  3. 3. France The current business environment French GDP contracted by 1.2% in the last quarter of 2008, due mainly to a massive drop in car production (-28%), a huge destocking of industry and a contraction of export business (estimated to decline by more than 3.5% in the first half of 2009). Manufacturing continued to fall in March 2009 by more than 17% year-on- year. GDP growth for Q1 of 2009 is expected to contract by 1.5%. After a 10% increase in corporate insolvencies in 2008 - to 54,000 - this situation has deteriorated even further this year. Figures from the French Statistics Office INSEE and Altares show that, compared to the last quarter of 2008, corporate insolvencies rose by 21% in the first quarter of 2009 (15,000 judgements): with construction and housing (+27% and +22%), manufacturing excluding agriculture and food (+44%), and transport (+45%) particularly affected. Some industries, such as plastics, showed an even more dramatic trend (+183%). On the positive side, after a further deterioration in the business climate during the first three months, the April data showed some stabilisation, and consumption has increased by 2.2% in Q1 of 2009. The outlook for France Despite these positive trends, the overall outlook for the rest of the year is downbeat. French GDP is expected to contract between 2.0% (Consensus Forecasts) and 3.0% (IMF) in 2009. However, the decline should have bottomed out in the first quarter of the year. There is still considerable uncertainty about the expected level of consumer spending, due to rising unemployment. Nearly all industries are affected by the slump, but especially automotive and metallurgy, housing equipment, electrical components, paper, chemicals, rubber, and plastics: each of which continues to record negative trends. The general forecast for building and construction activities remains pessimistic, registering continuous decline in the order books, which decreased to 5.4 months’ worth of future orders compared to 6.9 months in previous years. Further destocking activities across French industry are expected in the coming months. In April 2009 the index measuring the receipt of orders has stabilised, albeit that it remains at its lowest level since 1992. Unless there is a fundamental turnaround in world demand, the business environment will not improve before the end of 2009. In this context, the increase in insolvencies registered since Q3 of 2008 should continue its trend in 2009, although it seems that the peak has already been reached. Forecasts are still difficult, but an overall increase of 20% in the number of insolvencies is possible in 2009. Almost all sectors will be affected by this trend, although some positive exceptions, such as pharmaceutical, agriculture and food industries, do exist. 3
  4. 4. Spotlight on industries in France Household appliance distribution How has the global economy downturn impacted the household appliance distribution? Household appliance consumption is directly affected by the economic downturn. In the current context, consumers are prioritising to protect their purchasing power and to secure their financial flexibility by increasing their savings. This trend affects both the price and the volume of the goods sold. What is the current trend in payment delays, payment default and insolvencies and why? The number of insolvencies in the retail sector increased by 7% year-on-year in 2008. In the first quarter of 2009 an increase of 18.7% was recorded, demonstrating the abrupt deterioration since the second half of 2008. This development is explained mainly by the contraction of sales and margins and the issue of finance working capital requirements. What should companies selling products into the household appliances sector pay particular attention to? Companies need to monitor the sales and gross margin trend. It is also vital to understand the working capital cycle to ensure that the inventories position is sufficient to meet the sales’ trend. What is Atradius’ short term (6 months outlook) for the households’ appliance distribution? The pressure on sales and margins will continue to increase for both wholesalers and distributors. Their ability to secure their financial flexibility is narrowing with stricter access to banking funds and also with sharper credit supplier capacity. We expect a continuing high level of insolvencies in this sector for the rest of the year. 4
  5. 5. Spotlight on industries in France Dairy industry How has the global economic downturn impacted the dairy industry? Some structural changes have seriously impacted the industry - especially on the agricultural side. Indeed, the deregulation of the milk prices in Europe and an excess supply across the world have precipitated a dramatic fall of the milk price and related products (butter, milk powder), putting all the upstream industry under pressure (agriculture cooperative, collection activities, raw material transformation, wholesalers). In addition, the current economic downturn is impacting the manufacturers as they face decreasing consumption of dairy products. What is the current trend in payment delays, payment default and insolvencies and why? Corporate insolvencies in the food industry increased by 5.8% in 2008 compared to 2007. However, in Q1 of 2009 insolvencies dropped by 5.3% year-on-year. This positive development reflects the general strengths of the food industry in France. What should companies selling products into the dairy sector pay particular attention to? Companies need to pay attention to the capacity/flexibility of the buyer to adapt its pricing and cost structure to accord with regular and abrupt raw material prices variations. It is also vital that the buyers benefit from secured and reliable milk (and derivatives) sourcing. At the same time, companies need to pay attention to the main outlets of the buyers and their ability to protect their margins against large players (such as mass markets retailers). What is Atradius’ short term (6 months outlook) for the dairy industry? We are not expecting an increase in insolvencies in this subsector in the short-term. However, in the mid- term the deteriorating milk price and the overall deregulation may have some fundamental impact on the solvency of the upstream industries, which have until now been considered highly resilient to defaults. 5
  6. 6. Austria The current business environment Austria’s economic situation has deteriorated further since our last Market Monitor analysis in February. As a small, open economy, Austria is highly dependent on developments in international markets. The global recession has led to sharply deteriorating foreign orders, exports and industrial production rates since October 2008. After a GDP contraction of 0.4% in Q4 of 2008, output has decreased further in Q1 of 2009 to 2.8% year-on- year, according to EU statistics. Early this year the Austrian economy was predicted to contract by 1.3% in 2009, but this forecast has recently been adjusted to 4.0%. Due to the high economic interdependence with Germany, the expected deep contraction of German GDP will also impact on Austria’s economic slump. The job market continues to worsen, albeit that there has been some recent deceleration in the downward movement. Unemployment is forecast to increase to 6.0% in 2009 and 7.1% in 2010 (compared to 5.8% in 2008). The effect of governmental stimulus packages is slow, and we will not see their full impact until the latter part of the year. With additional spending and lower receipts, the budget deficit is estimated to increase to 4.2% of GDP this year. Austrian debtors with existing loans have profited from European Central Bank’s interest cuts, as in Austria the share of loans with variable rates is quite high. But, while smaller credits have become cheaper, long- term financing still remains difficult due to continuing high interest rates. In March 2009 non-payments reached their peak and slowed down a month later, providing some hope that this negative trend might ease in the coming months. In Q1 of 2009 insolvencies increased by 29% year-on-year to 963: a continuation of the negative development since Q2 of 2008. Compared to the previous quarter, insolvencies rose by 5%. Overall we expect them to increase by 10-15% in 2009 compared to 2008. The outlook for Austria It is difficult to see any turnaround before the beginning of 2010, and recovery will remain modest in the mid- term due to the continued weakness of global demand. Tax reform and the car scrap scheme will continue to partially sustain retail trade in the coming months, but consumer confidence is at a low point, and rising unemployment will darken future prospects. While the retail sector will probably not grow in the coming months, it nevertheless remains a stabilising factor for the economy. 6
  7. 7. Spotlight on industries in Austria Paper How has the global economic downturn impacted the paper industry? With an export ratio of more than 85%, the paper industry is heavily dependent on the global economy. The print and packaging sectors, for instance, have suffered greatly from the worldwide recession, which has led to a massive drop in orders and a strong decline in Austrian paper production: down by 20% in the first two months of 2009. Companies complain that price levels are too low for nearly all ranges of products, and the profit situation of many firms is poor. Companies are having to adapt with urgency to changing market conditions, e.g. with more flexible working schemes or by ceasing production temporarily. What is the current trend in payment delays, payments defaults and insolvencies and why? In this sector, 17 companies have already filed for insolvency so far this year. In March and April a record high of non-payment was recorded. What should companies selling products into the paper sector pay particular attention to? Due to the economic slump, the importance of trade credits will increase. Therefore, suppliers should scrutinise the creditworthiness of their customers. Negative changes in the payment behaviour should serve as a warning sign. Any enquiry for a prolongation of payment terms by the customer should make suppliers wary, as this may lead to a decrease in their own liquidity and a sharp increase in their financial requirements. What is Atradius’ short term (6 month outlook) for the paper sector? We believe that the situation will continue to be bad. Investments continue to decrease as new projects are pared down to the absolute minimum. Investments in innovation or enlargement of facilities have been cancelled or postponed indefinitely. Companies are facing additional reductions in production capacities and staff lay-offs as further decreasing demand in nearly all markets is expected. 7
  8. 8. Spotlight on industries in Austria Timber How has the global economic downturn impacted the timber industry? The timber sector has already lost momentum in 2008 and will face steeply decreasing sales in 2009. What is the current trend in payment delays, payments defaults and insolvencies and why? In this sector, 32 companies have already filed for insolvency in Q1 of 2009. In March record levels of non- payment were recorded, while in April this development moderated somewhat. What should companies selling products into the timber sector pay particular attention to? As in other industries, suppliers should be vigilant for a sign of a client’s changing/deteriorating payment behaviour. They should be cautious if a customer fails to pay on time or proposes an instalment plan. Rigorous accounts receivables management helps to signal potential problems in time and to take the appropriate action. What is Atradius’ short term (6 month outlook) for the timber sector? The sector’s performance will continue to suffer, mainly because demand from the construction sector - as the main buyer industry, with a 75% share - is decreasing in all main markets. Demand and prices for sawn timber have both collapsed. The deteriorating profit situation will lead to a restructuring of the sector in the coming months. The timber industry is characterised by high overcapacities, and therefore adapting to reduced demand is the only way to relieve the increasing pressure on companies. One positive aspect is the fact that forestry will remain an indispensable provider of commodities to the woodworking and paper sectors and plays an increasingly important role as a supplier of raw materials for energy generation. This gives some hope that forestry will not be as hard hit as other subsectors. 8
  9. 9. Italy The current business environment Despite a relatively healthy banking system and low level of indebtedness in the private sector, Italy has not been immune from the global downturn. Italy’s open economy exposes it to the recession in other markets. The collapse of Italy’s export markets (Germany, USA, Eastern Europe etc) is having a strong negative impact on domestic growth. In Q1 of 2009, exports dropped by 19.6% compared to Q1 of 2008. According to the OECD, GDP in Q1 of 2009 has decreased by 2.4 % compared to the previous quarter and 5.9% year-on- year. In the same period, industry orders have fallen steeply throughout all sectors. Figures from the Italian Institute of Statistics (ISTAT) show that turnover decreased by 13% in the textile/clothing industries, 23% in the mechanical sector, 19% in the paper/wood industries, 29% in the chemical sector, and 35% in the metallurgy/steel industries. Only food and pharmaceuticals have recorded a less than 5% drop in turnover in the first quarter of the year. Nearly all Italian industries are reacting to the downturn by factory/production site closures (technical capacity usage is currently at 40%), redundancies (the highest level for the past 20 years), postponement of investments and raw material purchases, and by requesting longer payment terms and payment plans from their suppliers. The Italian government has intervened both in the financial sector and in the real economy to ensure a regular flow of credit to companies and the private sector, and to support overall demand (stimulus packages linked to construction, automotive, household appliances etc). The fiscal deficit is expected to rise to 5-5.5% in 2009/10. The outlook for Italy In April 2009, industrial and consumer index indicators improved. Industrial production was up 1.5% compared to the previous month - the first increase after 11 months - probably due to stimulus packages and to the reinstatement of stocks. Due to governmental incentives the automotive sector has shown more resilience than expected. Despite these signs of stabilisation, the outlook for the rest of the year remains uncertain: Forecasts of Italy’s GDP contraction in 2009 vary between 2.8% (Consensus Forecasts) and more than 4% (IMF), as investments fall sharply, export demand remains low and consumer expenditure stays under pressure. The labour market is expected to deteriorate further this year, with the unemployment rate forecast to climb to 9%. In view of worsening employment prospects, private consumption is expected to decrease by 3%. According to the Italian Chamber of Commerce, the overall number of companies which have entered into bankruptcy proceedings was 7,330 in 2008. In Q1 of 2009 it was 2,626, a 45% increase year-on-year and up by 18% compared to the previous quarter. For the second half of 2009 a continuing increase of payment issues and insolvencies is forecast. 9
  10. 10. Norway The current business environment The contraction of the Norwegian economy (mainland Norway without oil exploration) started in Q4 of 2008 and continued into Q1 of 2009. Private consumption had begun to shrink as early as Q2 of 2008, mainly due to lower car sales. But now this trend is flattening out, and consumption in Q1 of 2009 was almost back to the same level as last year. So far, the economy has been more resilient than in other European countries: due to a large oil sector, Norway is partly shielded from the global recession. As is the case elsewhere, financial institutions are much more restrictive with new lending, to both business and private clients. The banking sector looks healthy for the time being, but exposures in the Baltic countries could create some problems. The main sectors affected by the economic downturn have been basic metals (car parts), wood and wood products (building sector and paper), and furniture. In the shipbuilding and oil industry we have seen the postponement of investments, but the current level of activity is still high, thanks largely to necessary maintenance work. Both sectors are stabilising factors for the economy. In Norway, the fish sector is very important. In salmon farming we see large increases in sales prices, supported by huge production cuts in Chile because of the outbreak of salmon virus epidemic there. But the opposite is true for the white fish and stock fish subsectors, which are facing problems with volumes, prices and payments due to the economic slump in Norway’s main export markets. In general we can say that a few sectors have been hit as hard as in the eurozone, but overall the global economic crisis has so far had less negative impact in Norway than in many other countries. The outlook for Norway The number of insolvencies increased in Q1 of 2009 by 88% year-on-year. Construction, retail and restaurants were mainly affected. Already this year, 5 stock-listed companies have gone into bankruptcy (out of 55 on the main index). The number of insolvencies will remain high for the rest of the year. However, we expect the economic slowdown to abate gradually, as a more expansionary fiscal and monetary policy starts to take effect. In May 2009, the government announced an additional spending of 9.5 billion Norwegian krone (1 billion euros) of oil revenues in order to sustain economic activity. The government expects GDP to contract by 1% this year. The IMF is forecasting a larger contraction to 1.7%, which would still be favourable in comparison with the eurozone. 10
  11. 11. Canada The current business environment In the first quarter of 2009, Canada remained in the midst of a severe economic recession with steady increases in unemployment and personal bankruptcies. GDP contracted by 1.4% compared to the previous quarter and by 5.4% year-on-year, making it the largest fall since 1991. In the same period, exports fell by an annualized rate of 30%. Operating profits for Canadian businesses fell by 12% from the previous quarter, led by a 34% decrease from oil and gas extraction. Personal bankruptcies increased by 34.6%, while commercial bankruptcies decreased by 13.8% year-on-year – but this percentage should be viewed in the context that bankruptcy statistics are a measure of court administered filings and not necessarily all business defaults. While the situation is less dramatic than in some other countries; in particular export based nations such as Japan and Germany, the Canadian government was forced to unveil a robust stimulus package early this year to help combat the crisis. Some highlights of the stimulus package include (all C-$): Aggregated at 2% of GDP over 5 years; this will include $ 22 billion in 2009-10 with a further $18 billion to be dispersed up to 2013-14. These figures are in line with the IMF recommendations of 1.5% of GDP $ 5.3 billion to spur housing construction $ 6.2 billion in immediate infrastructure spending $ 5.8 billion to help stimulate consumer demand The budget provides an additional $ 200 billion to secure the financial markets by restoring confidence. This includes giving broad powers to the Bank of Canada to keep financial institutions liquid Export Development Canada (the Government’s Export Credit Agency) has been granted a temporary (2 year) expansion of their mandate allowing them to participate in the domestic credit insurance market. The outlook for Canada As a result of better than expected results from the United States and increasing commodity prices, the second quarter appears to be more positive. But the Canadian currency has recently appreciated against the US-$, which could negatively affect Canadian exports and slow the recovery. The private sector remains cautious as unemployment reached 8.2% and fresh concerns have surfaced because of recent Government projections of an increased deficit of Canadian-$ 50 billion. With major North American carmakers GM and Chrysler having filed for bankruptcy, employment figures and industrial output are expected to suffer further declines. Following the American lead, the Canadian and the Ontario provincial governments have extended a Canadian-$10 billion bail-out on top of the stimulus package. In the financial markets, while confidence is beginning to return to the economy, the lending rate remains low, and there are still concerns that banks are hoarding capital and preventing a free flow to consumers and businesses. Overall, while there is room for some optimism, with the full effects of the fiscal stimulus still fairly distant the recession is expected to last into 2010. 11
  12. 12. New Zealand The current business environment The current business environment is difficult, with both manufacturing and wholesale trade industries contracting. Manufacturing activity fell 3.8% in Q4 of 2008. The wholesale trade industries faired no better with a contraction of 4.9% in economic activity. The only sectors showing any growth for the quarter were finance, insurance, business services, food, beverages and agriculture. Consumer confidence is at an all-time low, as the previous asset backed spending boom has fallen away and unemployment increases; it is now thought that one fifth of home owners are in negative equity. Spending on household durables (cars, furniture and appliances) and non-durables (food and beverages) was down in Q4 of 2008: only spending on services offset this decline. Retailers and manufacturers alike have felt the pressure, as consumer spending has ground to a halt. Retailers have themselves discounted heavily - in some cases by as much as 70% - to encourage sales, indicating low profit margins. A recent survey by ANZ bank indicated that 49% of retailers expect their businesses to perform badly in the year ahead. Building activity has deteriorated since 2007; building consents were 31% lower in April 2009 year- on-year. As New Zealand is a large exporter (33% of total trade), the contraction in the economies of its main trading partners has also served to compound the situation, as has the recent rise in the NZ-$. Dairy, which represents 20% of all exports, has suffered heavily, as prices have fallen sharply. Insolvencies – both corporate and personal - are up year-on-year. Younger businesses and the services sector appear the most vulnerable to cash flow and payment issues. The outlook for New Zealand The outlook remains difficult. There are varying opinions on when New Zealand will emerge from the recession: from late 2009 to mid 2010, but it is difficult to see any major turnaround before 2010. Developments in the global economy will continue to be critical for New Zealand, especially through their effects on access to credit, the value of the NZ-$ and the demand for exports. March Consensus Forecasts showed that the economic activity of New Zealand's trading partners will probably contract by 1.8% in 2009, impacting further on New Zealand’s strategy of exporting its way back to growth. Furthermore, the level of consumer indebtedness, the continued downward spiral of house prices and the retraction of ‘asset backed’ spending will continue to have a negative impact on the economy. On a positive note, the government has raised infrastructure spending by nearly NZ-$ 8 billion to support jobs over five years in its recent annual budget, following some NZ-$ 3.1billion of stimulus spending announced earlier this year. The Economist Intelligence Unit has revised its forecast for real GDP in 2009 upwards to a contraction of 2.9%. 12
  13. 13. Brazil The current business environment After years of solid growth and business expansion, the global downturn has now harmed Brazil’s economic performance. GDP growth decreased from 5.4% in 2007 to 5.1% in 2008, and current official estimates forecast a GDP contraction of 0.4% in 2009. In March 2009 corporate insolvencies rose by 50% year-on- year, more than double the figure for February. Nevertheless, Brazil currently shows some signs of recovery. The government has taken measures to revive the economy, such as reducing interest rates and introducing tax exemptions for products including cars, electric appliances and construction materials. Those measures have boosted sales: new car sales have reached the highest levels ever registered in Brazil. The trade balance is still positive. In the first quarter of 2009 it registered an increase of its surplus by nearly 50% year-on-year to 6.7 billion US-$. In 2008, foreign direct investment (FDI) increased by 30% year-on-year, while the average growth rate of emerging markets was at 7% - a clear indicator for multinational companies´ confidence in the Brazilian market. After three months of uncertainty, FDI has doubled in April 2009 year-on- year, amounting to 4 billion real (2 billion US-$). For May 2009 the Central Bank estimates the highest FDI inflow since April 2008, underlining the persistent confidence in the Brazilian economy. The outlook for Brazil Despite official estimates of a GDP contraction of 0.4%, there are also forecasts of more benign scenario with a positive GDP growth. Industrial production shrank by 3.9% between April 2008 and April 2009, but in April it rose again by 1.1% year-on-year. Main drivers of production growth were machinery, electronic equipment, and metal products. The central bank has indicated that interest rates will remain on the current lower level as long as inflation remains under control. The government has made clear that it does not intend to extend fiscal measures which have boosted new car sales beyond June 2009. This may lead to a modest dip for the automotive sector after Q2 of 2009. 13
  14. 14. Japan The current business environment Japan’s economy is very export oriented (cars, electronics) and as such has been hit hard by the recession since Q4 of 2008. This is well illustrated by the GDP contraction of 3.2% and 4% in Q4 of 2008 and Q1 of 2009 respectively on a quarterly basis. This sudden decrease was driven by the lacklustre demand worldwide and the very strong Yen against international currencies. Companies halted investment plans and, as a result, capital expenditure dropped by 10% in Q1 of 2009. Some sectors were hit very hard: demand for automotive decreased by 30% and demand for machinery dropped by a massive 80% year-on-year. The number of bankruptcies increased by over 10% in the first quarter of 2009 compared to Q1 of 2008. The employment market is weak and, according to job agencies, there are no signs yet of a recovery in job offer. The outlook for Japan For the first time in many months we are seeing slightly better news, and it could be that Japan’s economy has hit the bottom. In May 2009 the index for economic conditions increased at last. However, 50% of the respondents (small business owners) think that the economy is still worsening, while 40% believes it has bottomed out. Another positive sign is some easing in falling exports: from 46% in March to 40% in April. According to the Bank of Japan there are signs that the commercial bond and paper market is picking up again. GDP is expected to recover slightly in Q2 of 2009 after the sharp decreases we witnessed in the previous quarters. Nevertheless, despite this hesitant positive news, we are far from a pronounced recovery and the remainder of 2009 will be difficult for the Japanese economy if the global economy does not rebound soon - and strongly. 14
  15. 15. Atradius Collections: Keep your cash flow healthy Keep your cash flow healthy with rigorous accounts receivable management Accounts receivable management requires vigilance and foresight, so here are a few tips to help you stay clear of potential debt. It’s important to know your customers. So, when dealing with a potential customer for the first time, you should always check their creditworthiness with a ratings agency or credit insurer. Spread your risk, and don’t rely too heavily on only a few customers. If 80% of your turnover comes from 20% of your customers, and one of them goes bankrupt, your finances could be severely damaged. Agree on clear delivery and payment terms and conditions, and ensure that your customer fully understands those terms. This will be crucial if you ever need to instigate a collection process. Take care to avoid your customer trying to impose their own terms and conditions: if there’s any sign of this, inform them again - in writing and before goods are delivered or services provided - that your terms govern the contract. . Without making yourself uncompetitive, consider shortening the credit period that you offer – the longer the credit period, the greater the chances of non-payment. After delivery, enquire whether your product or service meets with the customer's satisfaction. Any potential problems can be ironed out early, limiting the chances of a dispute over payment arising later. Keep an especially close eye on companies with a negative credit rating. Call them before payment is due to check that everything has taken place as agreed - and to see if you may need to put in place a payment schedule to assist the customer to pay Manage your outstanding receivables carefully. Maintain contact on a regular basis and take action promptly in the event of payment problems by sending reminders and payment demands. Even if you have done everything to manage your accounts receivable portfolio diligently, problems can still occur. So, if your customer has failed to pay on time, follow a consistent demand process. A reminder call just before the due date Notify the debtor that you have not received payment within 15 days after the agreed due date. If this doesn’t lead to payment, send a written notification to the debtor requesting payment at 30 days after the due date. At the most, 45 days after the due date, give the debtor written notice of the final date by which the amount must be paid. If your debtor has not paid by 60 days after the due date, it’s time to hand the case over to a professional collection agency. 15
  16. 16. Atradius Copyright. While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this document is provided ’as is’, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied. In no event will Atradius, its related partnerships or corporations, or the partners, agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any consequential, special or similar damages, even if advised of the possibility of such damages. 16