Which countries are easier for collecting unpaid invoices, and which ones are harder? Allianz Trade, the largest credit insurer in the world, wrote a report on this.

Sweden comes out on top, followed by Germany, the Netherlands, Finland and Portugal. Belgium also remains in the top 10. On the other hand, it is concerning that USD 4.2 trillion in receivables is at risk in the most 'complex' countries. These include Saudi Arabia, but also, closer to home, Bulgaria, Hungary, Poland, Romania, Greece and Italy.

The battle against soaring inflation has caused central banks around the world to tighten their monetary policy, resulting in rising financing costs for businesses at risk of liquidity problems. In this context, debt collection becomes even more challenging, especially for our export-oriented businesses.

In its study, Allianz Trade investigated how effectively invoices can be collected. This is a representative sample, as the 49 countries investigated represent 85% of global trade and 90% of global GDP. The research was based on local payment practices and bankruptcy legislation, together with the success rate of legal recovery. These three criteria are different or more complex from one country to another and determine the success rate. The global average, on a scale from 0 to 100, also happens to be 49, which corresponds to a 'high' level of collection complexity.
With a rating of 35 and a 'notable' level of complexity, Belgium (see table) is performing relatively well — in fact, slightly better than in 2018 (36). Belgium also scores well in terms of payments to foreign businesses: within 35 days. In the Netherlands, by contrast, this occurs within 47 days. Our court procedures are reliable and in line with EU standards. The enforcement of domestic judgments, however, continues to be time-consuming and expensive. Pre-legal action by debt collection specialists therefore remains the most efficient option for recovering debts.
The 2022 ranking shows that it is relatively easy to collect debt in three out of ten countries. The easiest of these countries are located in Western Europe. Johan Geeroms, Director of Risk Underwriting Benelux for Allianz Trade, says, 'Our study shows a reasonably stable situation in the Eurozone. This can be explained by government support during the COVID pandemic, which made debt collection procedures fairly rare. But vigilance is needed now that support packages are being withdrawn, loans are no longer "free" and the economy is stalling. Payment problems will increase rapidly from now on, and with less revenue, businesses will delay payments for as long as possible in order to stretch their liquidity position.'

Allianz Trade estimates that trade receivables in countries with a 'severe' level of collection complexity amount to more than USD 4.2 trillion, versus USD 3.5 trillion for countries with a 'very high' level of complexity, and USD 1.9 trillion and 2.4 trillion respectively for countries with a 'high' and 'notable' level of collection complexity. 'In concrete terms, this means that 65% (or 2/3 of the 49 countries) have a "severe" to "very high" level of complexity, where businesses risk losing about USD 7.7 trillion worth of debts. So it is vital to take great care as to which country you do business with or export to,' advises Geeroms.

Allianz Trade covers the risk of default of payment (suspected insolvency) and fixed insolvency through its trade credit insurance, but also sees itself as an advisory trading partner. 'We offer policy cover for the debtor portfolio of both SME clients and multinationals, but our priority is predictive protection. This involves thoroughly pre-screening the clients of our clients in terms of solvency, liquidity, viability, and the potential to pass on the higher current purchasing costs (energy, inputs, transport and salaries due to the shortage on the labour market),' says Geeroms.

One bright spot from the report is that 20 of the 49 countries have seen an improvement in their collection complexity score over the past four years, including the most 'complex' countries such as Saudi Arabia and China. This is partly because the COVID-19 crisis prompted them to accelerate insolvency framework reforms that may have been already planned.

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