- Compared to 64% last year, only 38% of the companies are utilizing open account as their main mode of payment this year, thereby indicating a drastic change
- Government companies and JVs were less affected during the financial crisis while Private Limited companies and Partnership concerns suffered the most
- 19% of companies surveyed feel that the global crisis is still not over. They believe the crisis will end by 2011
- More than 60% of the defaults come from small and private companies (Proprietary concerns, Partnership firms and Pvt. Ltd. Companies)
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.
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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).
About Coface
Coface's mission is to facilitate global business-to-business trade by offering its 135,000 customers solutions to fully or partly outsource trade relationship management and to finance and protect their receivables: credit insurance, factoring, business information and receivables management. Thanks to the worldwide local service delivered by 6,600 staff in 65 countries, over 45% of the world's 500 largest corporate groups are already customers of Coface.
Coface is a subsidiary of Natixis whose share capital (Tier 1) was 16.8 billion Euros end December 2010.
About Coface in Asia
Coface has established a network of companies and partners in Asia since 1994 and now has direct presence in Australia, China, Hong Kong, India, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam in the Asia Pacific Region.
Coface established a Liaison office in India in early 2000 which was converted into a Credit Management subsidiary in February 2001. Coface has technical partnership agreements with IFFCO-Tokio Marine General Insurance Company, ICICI Lombard General Insurance Company, Universal Sompo and Bharti AXA for its offer in domestic and export credit insurance.