Why 43% of Asia B2B sales rely on trade credit

Singapore records the region's highest share of credit-based transactions at 51%.

Customer payment risks in business-to-business (B2B) trade across Asia are increasing, as late payments and bad debt write-offs put more pressure on company cash flow and working capital.

On average, 43% of B2B sales in Asia are made on credit, whilst the rest are paid upfront, according to Atradius’ “Pressure on liquidity across Asia builds as B2B payment risks edge up” report.

Companies across the region are adjusting their trade credit policies to protect liquidity and reduce financial risk. Companies are taking a cautious approach as they balance sales growth with the need to protect cash flow.

Construction firms, particularly mid-sized businesses, rely more heavily on trade credit because of long project cycles and complex supply chains.

Singapore has the highest share of credit-based B2B sales in the region at 51%, reflecting its position as a major regional and global trading centre. China has the lowest share, as companies make greater use of alternatives such as supply chain finance.

The use of trade credit has recently increased amongst large industrial companies and in markets such as Vietnam and Indonesia. 

This reflects efforts by businesses to maintain sales volumes and protect market share.

Most Asian suppliers require B2B customers to pay within two months of invoicing. Longer payment periods remain less common.

Smaller companies generally offer shorter payment terms to protect liquidity, whilst larger companies provide more flexibility on a selective basis. 

Japanese firms offer the shortest payment terms, whilst Vietnamese companies provide the longest payment periods in the region.

Payment policies across Asia have remained broadly stable in recent months. However, large industrial companies and Vietnamese firms have been more active in changing their terms and are more likely to extend payment deadlines than shorten them.

Despite tighter credit controls, late payment remains widespread. More than 80% of suppliers across Asia report receiving payments after the agreed deadline.

Overdue invoices account for nearly one-third of B2B receivables across the region. The figure rises to about two in five amongst smaller construction and trading companies.

Indian businesses report the highest exposure to late payments, whilst Japanese companies have the lowest level of delayed payments.

The share of overdue invoices has increased across Asia in recent months, indicating weaker payment discipline. The rise is most noticeable amongst manufacturing companies and in Taiwan and Indonesia.