Respondents in Denmark are the most inclined to use trade credit of all the countries surveyed in Western Europe. 70.5% of the total value of their domestic B2B sales is transacted on credit terms.
Survey results for Denmark
Sales on credit terms
Respondents in Denmark are the most inclined to use trade credit of all the countries surveyed in Western Europe. On average, 70.5% of the total value of their domestic B2B sales is transacted on credit terms (survey average stands at 44.9%). Over the past two years, the average value of domestic sales made on credit in Denmark increased, 12 percentage points, nearly three times the average increase recorded in Western Europe over the same time frame.
When looking at foreign trade, Danish respondents reported that 63.1% of the value of their foreign B2B sales is made on credit terms. Once more, this is well above the average recorded in Western Europe (37.7%). Additionally, foreign credit-based sales increased significantly (by 7.4 percentage points) over the past two years. This increase is more than twice as high as that recorded in Western Europe. As seen in previous surveys, this marked use of trade credit in B2B transactions may reflect the interplay between a strong emphasis on receivables management and a high payment morale in the Danish business culture together resulting in reduced risk of default when selling products and services on credit terms to B2B customers.
Average payment term
Domestic B2B customers of respondents in Denmark are extended an average of 25 days from the invoice date to pay invoices. Over the past two years, this term increased, on average, by two days (in line with the survey average). This is now aligned with the average domestic payment term recorded in Sweden (26 days) and in the Netherlands (24 days). However, it is 10 days longer than the average term of 34 days in Western Europe. The payment terms given to foreign B2B customers to settle their trade debts average 27 days. This is slightly above the average for Western Europe (32 days) and is aligned with the foreign invoice payment terms observed in Sweden (28 days). Over the past two years, the average payment terms for foreign customers decreased slightly by an average of three days.
Overdue B2B invoices
In Denmark, an average of 28.7% of the total value of domestic B2B invoices remained unpaid at the due date. This percentage, which is the second lowest of all the countries surveyed after that in Sweden (20%), is well below the average for Western Europe (40.2%). In terms of B2B credit sales abroad, late payments amounted to 30.5% of the total value of foreign B2B invoices. Once more, this is below the survey average of 35.4%, and in line with the rate of late payments by foreign buyers recorded in Sweden (25.3%). The delinquency figure (invoices unpaid 90+ days after due date) is relatively sizeable. 3.7% of domestic and 5.3% of foreign B2B invoices became delinquent and are likely to become collections cases. These figures are well below the survey average of 7.6% for domestic delinquency rates and 7% for foreign ones. Over the past two years, the level of domestic overdue invoices in Denmark increased by 9.8 percentage points (survey average is 10.3 percentage point increase). The level of foreign overdue invoices increased as well by 5.4 percentage points (survey average is 6.4 percentage point increase). A possible explanation for the notable upswing in domestic late paid invoices may be that two years ago, the rate of late payment of domestic invoices in Denmark was relatively low, and now it is almost in line with the survey average. Late payment on B2B invoices (domestic and foreign) in Denmark is reflected in the Days Sales Outstanding (DSO) figure posted by respondents, which averages 35 days (10 days longer than two years ago). However, this is the second lowest DSO figure observed in Western Europe, after that in Germany (30 days) and close to that in Sweden (36 days). It is also below the 48 days average in Western Europe.
Average payment delay
Domestic B2B customers of Danish respondents, settle their past due trade debts, on average, 12 days after the invoice due date (survey average is 22 days). The average time it takes foreign B2B customers to make their late payments is 15 days (survey average is 20 days). This means that Danish respondents receive domestic and foreign payments, on average, 37 days and 42 days after the invoice date respectively. It is worth mentioning that the domestic payment duration in Denmark is the second lowest across the countries surveyed after that in Sweden (35 days). Over the past two years, the average payment delay from domestic and foreign customers saw a marked fluctuation. As a result of this fluctuation, both the average domestic and foreign payment duration is now around 10 days shorter than two years ago. In light of the Danish business culture we commented on earlier, it comes as no surprise that 25% of the companies surveyed in the country (compared to 20% in Western Europe) consider the safeguarding of their trade flows to be one of the biggest challenges to business profitability in 2015.
Key payment delay factors
The majority of the respondents in Denmark (48.5%), compared to 34% in Western Europe, reported that their B2B customers delay payments most often because they use outstanding invoices as a form of financing. This is the highest percentage of respondents citing this reason of all the countries surveyed in Western Europe. According to this finding, Danish respondents rely more on trade credit than on bank trade finance to support their transactions than their peers in Western Europe do. 41% of Danish respondents compared to 29.4% in Western Europe believe that foreign B2B customers pay invoices late because they are using them as a form of financing. The second most often reported reason for foreign payment delays is the complexity of the payment procedure. Just over 31.6% of respondents stated this reason, compared to 28.1% in Western Europe. Over the past two years, there was an increase in the percentage of Danish respondents reporting the above mentioned delay factors, suggesting that these are growing concerns in the country’s business environment.
Danish respondents reported that 1% of the value of their B2B receivables was uncollectable. This is below the 1.2% average for Western Europe. In line with the survey pattern, the proportion of domestic write-offs is larger than that of foreign ones. Domestic uncollectable B2B receivables are most often reported on sales to the construction and consumer durables sectors. Foreign B2B write-offs are most frequently attributable to B2B customers in the construction, consumer durables and machines sectors. For a notably higher percentage of respondents in Denmark (72.7%) than in Western Europe (66.4%), B2B receivables were mainly uncollectable because the customer went bankrupt or out of business. For more insights into the B2B receivables collections practices in Denmark, please see the Global Collections Review by Atradius Collections (free download after registration), available from April 21st 2015 on www.atradiuscollections. com.
Payment practices by industry
Survey respondents in Denmark reported granting trade credit terms mainly to B2B customers belonging to the following sectors: construction, consumer durables, chemicals, electronics and services (business services, financial services and overall services). Domestic and foreign B2B customers in the consumer durables sector receive invoice payment terms (averaging over 32 days) which are above the average for the country. Despite this, customers in the consumer durables sector are the slowest payers, with payment delays averaging around 20 days after the due date. The highest proportion of overdue payments, however, is generated by customers in the construction sector. Around three in five respondents in Denmark believe that customers in the construction sector delay payments most often because they use outstanding invoices as a source of financing. Over the coming 12 months, respondents in Denmark do not expect any significant change in the payment behaviour of B2B customers in the above mentioned sectors.