Payment delays get shorter as credit risks grow

Bad debts owed to exporters from firms in the worst-performing European economies double

PUBLISHED : Thursday, 11 July, 2013, 12:00am
UPDATED : Thursday, 11 July, 2013, 3:17am

Hong Kong exporters are getting paid faster this year but the credit risks from buyers in some pars of the world, such as southern Europe, is on the rise.

Although six in 10 respondents, mostly small and medium-sized exporters, said clients failed to settle their dues on time, the delay has shortened from an average of 77 days last year to 50 days this year, a poll by the University of Hong Kong showed.

Companies from the United States accounted for 15 per cent of bad debts this year, up from 10 per cent last year, even as the US economy shows signs of recovery. A struggling Europe's share of bad debts, on the other hand, fell sharply from 18 per cent last year to 8 per cent this year.

EOS Hong Kong, a credit management firm which collects bad debts for companies, said the number of its European targets had almost halved as a whole this year, though cases reported from Portugal, Ireland, Italy, Greece and Spain have doubled.

Cobe Tsang, managing director of EOS Hong Kong, which commissioned the survey, said exporters should minimise risks by buying credit insurance and use e-commerce payment platforms or factoring services that also provide credit assessment.

Factoring is a means of financing in which business owners sells accounts receivable at a discount to a third-party funding source to raise capital.

The survey found a third of the 502 enterprises it studied never took any of these precautions, while seven out of 10 companies with bad debts said they were experiencing problems collecting their dues.

Mainland companies accounted for 44 per cent of the bad debts this year, the same as last year despite the recent liquidity crunch.

Yu Pang-chun, a member of the Hong Kong General Chamber of Commerce, urged local exporters to do more credit checks when they tap into new markets in the US and China.

"Although the statistics from the US are quite encouraging, the orders we received from American buyers remained small and they squeezed hard on the margins. Consumption there is not really so good," Yu said.

More than 60 per cent of the respondents said they had no plans for expansion, offering concerns about bad debt and lack of information on buyers' creditworthiness.