Swiss SMEs are more critical of payment practices than their EU counterparts

As a representative study of more than 10,000 companies in 29 countries, the European Payment Report 2017 (EPR2017) also illustrates Swiss payment practices in the country report: Around three quarters of companies in this country fear higher default risks among their customers. Together with the view of administrative challenges in processes and accounting, these risks can lead to revenue losses and block company growth.

In addition, almost one in ten (9%) of Swiss small and medium-sized enterprises (SMEs) could create more jobs if their customers paid bills on time, according to the study. The EPR2017 country report clearly shows possible influences of timely payment on the economic situation in our country: "Better payment morale brings Swiss companies more manpower. There is immense potential in this for the labor market and thus also for the sustainable strengthening of the Swiss economy," Thomas Hutter, Managing Director Intrum Justitia Switzerland Ltd, is convinced.

No money, administration and intent - as reasons for late payment.

Swiss companies surveyed still largely see financial difficulties as the reason for their customers' late payments (85%, +8%), but administrative challenges have increased as a risk factor by 15% to 70% compared with 2016. Companies also continue to see deliberate delay as one of the main reasons for falling payment morale (68%, +4%). When it comes to payments, Mr. and Mrs. Swiss have now caught up with and overtaken the European average. Last year, Switzerland was still lagging behind - with comparatively long average payment periods. Both figures have fallen even more sharply compared with the previous year - in other words, Swiss SMEs grant shorter payment periods and also pay faster themselves.

Loss, downsizing and threat to existence - as risks after late payment

Around one-third of the companies surveyed in Switzerland say they will have to accept a drop in sales. Half even fear liquidity bottlenecks due to late payment of receivables. And while one in seven companies is cutting jobs because of this, as many as one in five SMEs fear for their existence due to such payment defaults.

The outlook for next year is clouded

One in four SMEs (25%) in this country expects their customers to pay even later in the next twelve months than at the time of the survey. A pessimistic view of the development of payment practices shared by only 12% of companies in our neighboring European countries - half as many as in Switzerland.

58% of the Swiss companies surveyed have already accepted payment terms that were longer than they would have liked. Multinational companies in particular are increasingly demanding longer payment terms, an increase of 10% to 42% in the study. "Late and non-payment leads to a negative spiral - loss of sales, liquidity shortages and consequent blockages to growth. Especially for SMEs - the backbone of our economy - which are hit the hardest. Here, the willingness to pay must improve - SMEs must be supported," Hutter demands. Companies mainly try to protect themselves from these increasing risks of late payments and defaults with credit checks and debt collection.

What to do about declining payment morale?

Intrum Justitia recommends various measures at all levels (local, national and international) to mitigate late payments. Here are the most important tips:

1. Establish and implement a balanced and sound credit policy to manage risk and growth and continuously develop it.
2. Evaluate and track capital used in your credit management process to reduce the cost of capital.
3. Make sure you know the customers you do business with, too.
4. Be specific about your terms and conditions in contracts with your customers.
5. Involve sales, marketing and finance to create an efficient invoicing process and avoid non-payment.
6. Conduct monitoring of economic and industry information, including the solvency of your key customers and regularly check your customer addresses.
7. Reduce customer losses and strengthen customer relationships by managing your credit process based on customer payment history and solvency.
8. Implement an expeditious dunning procedure and charge interest on late payments where possible.
9. Weight your customer structure according to risk and growth potential.
10. Act immediately to avoid non-payment. Do not delay the process.

More information: Intrum Justitia AG