Over half of Ireland’s exporters have been hit by bad debts, according to a new survey sponsored by credit insurance and credit management company, Atradius (formerly Gerling NCM).The survey by the Irish Exporters “Association reveals that Ireland is one of Europe’s most successful trading nations, with more than 40% of exporters reporting that overseas trade accounts for at least 80% of their annual turnover. However, getting customers across the globe to pay up can be tough.The International Trade Finance and Credit Management Export Ireland Survey 2004, recently launched, found that:
Credit insurance is becoming an important safeguard for Ireland’s exporters and is used by 28% of the businesses surveyed. But Atradius says the survey also reveals that Irish companies not using credit insurance could actually be missing out on lucrative export markets.
Walter Kee, regional manager of Atradius in Ireland, explains: “This new survey is hugely important in showing just how vital export trade is to Ireland. But it also reveals a worrying picture where trading conditions are tight and a lot of time and energy is spent on credit management. This puts a huge strain on people and finances and the potential risks of bad debt could stop companies from exploring new export markets. Credit insurance not only provides exporters with valuable data on the companies and countries they are trading with, it can also protect them from bad debts, insolvencies and even political problems.”
The survey found that Irish exporters offer generous payment terms, with 59% of companies giving their overseas customers an average of 60 days to settle their bills. Even so, 15% of the companies surveyed still experience payment delays from their foreign customers.
The fact that 49% of companies finance their exports out of their own funds and 20% turn to the bank for an overdraft means that these late payments put further pressure on cash flow. Very few Irish exporters use specialist funding such as factoring. This is particularly worrying as there is a growing trend towards open accounts for securing payments from overseas customers, as opposed to traditional methods such as letters of credit and advance payment.