How Long Does It Take Customers to Pay Invoices?

Customers are taking more time to pay invoices. How is global DSO impacting your business?

In line with the economic slowdown, companies preemptively reduced payment delays in 2018, except for Mediterranean countries. 

Euler Hermes issued its annual review and forecast of global average Days Sales Outstanding [1] (DSO), based on a sample of 25,000 listed companies across 20 sectors and 36 countries. Days Sales Outstanding (DSO) is a measure of how long it takes companies to collect cash from customers.

Euler Hermes’ study shows that after hitting a 10-year high in 2017, global average DSO fell by -1 day to 65 days in 2018, a sign of companies becoming more cautious in line with the global economic slowdown. As world GDP growth slows further this year, Euler Hermes expects DSO to reach 64 days in 2019.

Learn how long your client may take to pay you in the inforgraphic below.

B2C and B2B sectors have to deal with diverging DSO destiny; retail is an outlier

Looking at the change in DSO, we again identify two clusters:

  • B2C industries show DSO changes being above the global average: Companies in the transportation, household goods, agrifood and telecom sectors have a higher capacity, compared with B2B, to impose new terms of payments when needed. So they are more likely to grant longer terms of payments for commercial reasons if they consider the cycle as not being too deteriorated. Indeed, in a macroeconomic perspective, as we are in a late phase of the cycle, and as they are exposed with a delay to economic fluctuations, B2C companies can be incited to continue proposing laxer terms of payment. The case of pharmaceuticals is a little specific. Drug makers often suffer from high level of DSO but this situation is linked to their customer base dealing mainly with public health insurance systems. Fortunately, laboratories are usually awash with large cash hoards and can afford an extended length in DSO level accordingly.  
  • B2B industries have DSO changes being below the global average: Construction, machinery, metals and energy, as well as electronics are more directly and in an earlier manner impacted by the fluctuation of the economic cycle. Those kinds of companies and sectors are more cyclical by nature. They have already observed a global deceleration of growth, meaning upcoming economic hardship; as a result, companies fearful of being paid too late shortened their DSO in 2018. Chemicals and automotive have got away with stable DSO levels in spite of accumulating hurdles for car makers dealing with tightening new pollution standards.
  • USA and Canada avergae DSO are better than the global average, but 50+ days is still a long time to wait for payment
  • Some of the countries the USA exports to (Japan, India, and more) have average DSO 65+. 

 

 

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