Canada: trade credit KPIs hold steady despite recession

Introduction

As our survey results highlight, 36% of the businesses we surveyedin Canada said they plan to adopt credit insurance during the coming months. This is by far the largest  percentage of the region. The use of credit insurance will go some way to supporting businesses that expressed concerns about the costs of internal credit management and will provide liquidity security to support ongoing operations and possibly investment.

The Atradius Payment Practices Barometer provides us with the valuable opportunity to  hear directly from businesses how they are coping with changed trading and economic  circumstances caused by the pandemic. The survey questionnaire was completed by  businesses in Canada during Q2 2021, a full year after the World Health Organisation declared Covid-19 a global pandemic.
 

Key takeaways from the report

The majority of the businesses we spoke to in Canada told us that they did not increase  the amount they traded on credit after the outbreak of the pandemic. Yet despite this, almost half told us that they had spent more on managing their account receivables over the past year, with additional costs spent on collecting overdue payments.

A significant proportion cited containment of credit management costs as a major concern for the coming months. For businesses that choose to self-insure their account receivables such costs can increase during periods of heightened credit risk, particularly where customers slow down payments to support their own liquidity.

Outsourcing to a provider, such as a credit insurer, can prove to be cost effective in such instances, through enhanced operational and collection efficiencies and stability of  liquidity.
 

Key survey findings for Canada

• 55% of the businesses polled in Canada told us they accepted trade credit requests to encourage repeat business with established B2B customers (compared to 38% in the US and 53% in Mexico).
• 48% of respondents in Canada reported increased administrative costs associated with the management of accounts receivable during the year following the outbreak of the pandemic (compared to 55% in the US and 37% in Mexico).
• To mitigate credit risk, 65% of the businesses polled in Canada told us they did not vary payment terms in the year that followed the outbreak of the pandemic (higher than the US and Mexico with 49% and 54% respectively).
• An average of 48% of the total value of B2B invoices issued by businesses polled in Canada are overdue (compared to 50% in the US and 45% in Mexico). 5% of long-term overdue invoices (more than 90 days overdue) were written off.
• Looking ahead, 51% of businesses in Canada told us they expected credit would be used more often as a short-term trade finance tool over the next 12 months (significantly more than in the US 32% and Mexico 36%).
   

Interested in getting to know more?

For a complete overview of the payment practices in Canada and in the local chemicals/pharma and steel/metals industries, alongside the services sector please download the complete report.