Late payments are have soared in the US, Mexico and Canada, as businesses struggle with the impact of COVID-19, compromising cashflows and increasing reliance on bank finance.

This is according to trade credit insurer, Atradius' annual Payment Practices Barometer, which suggests that late payments affected some 43% of the total value of invoices issued across the three countries, up from 25% last year. The total value of invoices overdue past 90 days has doubled year on year to 13%, while 4% of the total value was written off as uncollectable, up from 3% a year ago.

Despite this, businesses remain generally optimistic with more than half (52%) anticipating an improvement in payment practices in the coming months, compared with a third (32%) which predict a deterioration. A belief that banks will continue to provide credit to cushion the effects of poor cashflow is thought to be behind this optimism.

James Burgess, head of UK commercial for Atradius commented: “Research into business behaviour and sentiment gives an excellent insight into a region’s economic resilience. The 2020 Atradius Payment Practices Barometer for the USA, Mexico and Canada is a particularly revealing story of two halves. On one hand is the dramatic increase in overdue payments and the undeniable indications that the region has entered recession. Whilst conversely, respondents convey optimism for a brighter future despite the gloomy figures to date. Of course, the reality hangs on the development of the COVID-19 crisis and the effectiveness of the region in reversing its negative effects.

“What is clear is the pressure USMCA businesses are feeling which is reflected by widespread deteriorating B2B customer credit risk. Invoice payment defaults are up significantly compared to last year as is the number of businesses awaiting payment subsequently delaying payment to their suppliers. In a climate rocked by late payments and sustained economic uncertainty, businesses must act cautiously when it comes to maintaining successful trade relationships; assiduously monitoring the risks of the wider economy and payment behaviours of individual customers, adopting a comprehensive and robust risk management strategy and seeking the right business support to protect against the very real risk of non-payment.”

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