Payment morale of companies declines after 8 years

Results of the international survey conducted by the EOS group among businesses:

• Every fifth invoice in Western Europe and every fourth in Eastern Europe is paid late or not paid at all.
• The payment morale of companies had been improving over the past eight years, but this year it declined for the first time.
• Not only is the payment period extending, but also the proportion of delayed and uncollectible payments.
• Czech companies are not afraid of bankruptcy due to unpaid invoices.
• Nearly half of European companies utilize external debt collection services.

Late payments at an eight-year high

Payment delays beyond the due date are common in the business environment, but the situation had been progressively improving since 2015 in both Western and Eastern European countries, including the Czech Republic. During the last survey of Czech businesses in 2019, the average delay in invoice payments was 21 days. This year, companies admitted a delay of 23 days, marking a shift for the worse for the first time in eight years. "The higher inflation rates, expensive energy, and the war conflict in Ukraine are increasing uncertainties and concerns among entrepreneurs, which they often address by withholding payments from suppliers. I fear that this problem will grow and may lead to insolvency for some smaller companies. The subsequent chain reaction could further deteriorate our economy," predicted the future trends Vladimir Vachel, the managing director of the debt collection agency EOS KSI.

Rise in the share of unpaid and delayed payments

According to the EOS group's survey, the payment morale in the Czech Republic worsened by 3 percentage points over the last three years. While in 2019, the share of late paid and uncollectible invoices was 19%, this year companies admitted to 22% of such cases. "The positive aspect is that Czech companies and consumers still approach their obligations responsibly. In terms of the share of delayed payments, we are faring much worse than the Germans, who have a stable 14%, but still above the Eastern European average. The worst situation is described by companies in Slovakia, where the share of overdue payments reaches 28%," commented Vladimir Vachel.

Czech companies aren't afraid of bankruptcy due to unpaid invoices

The survey revealed that Czech companies fear bankruptcy due to unpaid invoices from customers the least in Europe. Only one in six companies in the Czech Republic (15%) confirmed concerns, while the European average is around 20%. In Western countries, the most concern is found among companies in the UK (27%) and France (26%), as well as neighboring Germany (21%). Eastward from our borders, companies in Croatia (29%) and Greece (24%) express the most existential concerns. Slovak companies are similar to Czech ones, with 17% admitting fear of bankruptcy due to delayed payments.

When it comes to reasons for not paying invoices on time, Czech entrepreneurs most commonly cite secondary insolvency and full utilization of supplier credits. Invoices remain unpaid mainly because their customers owe them. This problem is faced by 53% of Czech businesses. In third place is the current insolvency (37%), which this year surpassed reasons due to insufficient internal capacities (33%). Companies in Romania (53%), Hungary (51%), and France (50%) mentioned the insolvency of customers as a serious problem.

Future Outlook: Optimism Replaced by Skepticism

When asked about their expectations for the payment morale's future development in 2019, companies across Europe expressed optimism. This year, the outlook for the future has literally turned upside down, both for Eastern European firms and from the perspective of those in Western Europe. Czech companies expect the development of payment morale in the next two years to be significantly more negative than the average.

Almost half of European companies use external debt collection agencies

To allow companies to focus on their core activities, many outsource some of their operations to external providers, including debt collection services. Nearly half of the companies in Europe (46%) confirm this trend. In Eastern European countries, the number of such companies grew from 41% to as high as 50%, surpassing even Western Europe (42%). In the Czech Republic, 41% of companies utilize this service.

About the survey:

The EOS group conducted the payment morale survey in collaboration with Kantar TNS in the spring of 2022. They surveyed both B2B and B2C segments in 3,200 firms across 17 European countries (Germany, UK, France, Belgium, Switzerland, Poland, Spain, Denmark, Romania, Greece, Bulgaria, Croatia, Slovenia, Hungary, Czech Republic, and Slovakia). In each country, including the Czech Republic, 200 companies were questioned on various aspects related to payment transactions and general economic trends.