subject: Companies trading in open account are increasingly cautious, reveals the Payment Survey conducted by Coface [print this page] Companies trading in open account are increasingly cautious, reveals the Payment Survey conducted by Coface
Mumbai, March 29, 2011: Coface world's leading trade receivables management company has recently concluded a survey of corporate credit risk management in India. The survey was to understand the general status of credit management, domestic payment experience and impact of the credit crises on the payment behavior amongst Indian companies. This survey is done for the third consecutive time in India.
According to the survey, Government companies and JVs were less affected during the financial crisis while Private Limited companies and Partnership concerns suffered the most. The main reason companies extended payment terms from their suppliers are due to financial difficulties, decrease in sales and delay in payments from the debtors
The survey states that majority of the interviewed companies feels that global financial crisis is over but 19% predict an ease by end of 2011
Mr. Samuel Jesuratnam, Country Head, Coface India says, "The survey is done for the third consecutive time in India and it aims at understanding the domestic payment trends of companies in India. We have seen a drastic change with only 38% of the companies utilizing open account as their main mode of payment as compared to 64% last year".
There is some caution from Indian companies in the way they manage their credit policy. A large majority of companies are adopting a conservative approach by granting a maximum of 30 days as standard payment terms. Market competition is still the main driving force behind extended credit terms (46% of the companies do it to enlarge their existing customer and 38% of the companies are looking at retaining their existing customer base).
Most industries offer a maximum of 90 days credit terms to their clients with the exception of Agriculture, IT/Computers, Textile, Telecom, Shipping, Consumer and Industrial electronics sectors, which offer longer terms.
Collection period has increased this year with more than half of the companies being paid 60 to 90 days from due date and almost 1/5 being paid even later.
The survey also states that 64% of the companies pay their overdues within 60 days from due date. But more than 20% waits for 90 days or more beyond due date to be paid (against 4% last year), showing a clear deterioration of payment patterns in India. More than 60% of the defaults come from small and private companies (proprietary concerns, Partnership firms, Pvt. Ltd. Companies).
