The payment practices of German companies deteriorated In the spring of 2013. In March 2013, 18.8 percent of all companies paid their invoices late. This is the worst value that has been registered during the past 12 months; it means that in March almost every fifth company in Germany did not pay its invoices on time. This is the result of the joint study, “Payment Practices of German Companies”, published by EOS Germany, the specialist for the management of customer-related risks, and the financial information agency Bürgel. Accordingly, the authors of this study measured the best value in June 2012: only 16.3 percent of all companies in Germany had not paid their invoices on time.
The sluggish economy in Germany is responsible for poorer payment practices. Thanks to consumption, the increase in wages and steady employment, the economy has picked up slightly during the first quarter of 2013. Nevertheless, German companies, especially those in the export sector, are presently reluctant to invest.
There is a further significant factor with a strong influence: customer payment behaviour has a direct effect on companies' liquidity. “In particular, companies that battle with high payment defaults have only limited financial leeway. This sets off a domino effect that starts with delays in payment, liquidity shortages and financial difficulties and ends up driving some companies into insolvency,” said Stephan Spieckermann, Managing Director of EOS Germany. Insolvent companies threaten to pull other companies down with them. “Due to the domino effect, even healthy companies can find themselves in financial difficulties,” Bürgel's executive manager, Dr. Norbert Sellin, added. “Approx. 20 percent of all insolvent companies have been hit by this domino effect.”
The joint survey published by EOS and Bürgel is based on the evaluation of the payment practices of just under 463,000 companies from all business fields. The analysis data has been taken from the business database DDMonitor (Deutscher Debitoren Monitor / German Debtors' Monitor). The DDMonitor records the pay-ment practices of companies and trade professionals in almost every sector of the German economy.
According to the study carried out by Bürgel and EOS, German companies have been battling not only with delayed payments, but also increasingly with bad debt losses during the twelve month period of investigation.
With regard to payment practices during the critical month of March, companies in the German state of Saarland performed worst: just under one-quarter of the companies there (24.9 percent) did not pay their invoices on time. At the same time, this 24.9 percent is also the lowest value for all of the federal German states in the period from April 2012 until March 2013. However, in March 2013 payment practices in North Rhine-Westphalia (21.0 percent of companies there paid late) and Bremen (20.9 percent) were also poor. In contrast, companies in Saxony show the best payment practice. For the same month, only 15.5 percent of the companies there did not pay their invoices on time. Thuringia (16.4 percent) and Schleswig-Holstein (16.9 percent) also achieved above-average results.
When viewing payment practices according to economic sectors for the month of March 2013, public utility companies (for water, waste water and waste management) showed the worst results: 27 percent. Companies in the construction industry were not much better: 23.1 percent did not pay their invoices on time. Bürgel and EOS show similar results for energy suppliers (22.0 percent).
In contrast, restaurant proprietors pay their invoices more punctually (7.6 percent defaults) as do public offices (8.3 percent) and businesses in the agricultural and forestry sector (9.4 percent).
In March 2013, public limited companies (Aktiengesellschaften) in particular did not pay on time (36.9 percent). “It appears that especially the larger companies exercise their market power and deliberately settle their invoices late,” Spieckermann commented.
The business practices of private limited companies (GmbHs) are not much better: 31.1 percent of these companies do not pay their invoices on time.
At 20.7 percent, the quota for trading concerns with limited liability (Unternehmergesellschaft [haftungsbeschränkt]) was also very high.
1.1 percent of those companies that do not pay their invoices on time eventually become a collection case. The worst here is Berlin with a share of 2.4 percent, followed by Brandenburg (1.5 percent), Saxony-Anhalt and Hamburg (1.4 percent each).
The B2B business database DDMonitor is jointly owned by Bürgel Wirtschaftsinformationen, EOS and Euler Hermes. The database includes the bigger part of the almost 4.0 million companies and trade professionals throughout Germany. Bürgel and EOS use the DDMonitor to regularly analyze the creditworthiness and payment practices of more than 450,000 companies.