The global growth comes has a good period but comes with a deterioration of payment deadlines. Days sales outstanding (DSO) increased by 2 days in 2017 up to 66 days on average worldwide, the highest level since 2007, according to a study by Euler Hermes Economic Research. In the last five years, the debt repayment was constant at 64 days.
As global growth has accelerated, companies have expanded their trust in their customers by extending the payment term. Thus, we expect the DSO to increase by another day to 67 days in 2018, due to positive economic and financial prospects.
The 2007-2008 economic and financial crisis has prompted companies to closely monitor or accelerate debt collection, reflected in the sharp drop in DSO (-5 days, down to 60 days in 2008 on average). The return to growth allowed DSO to go to 64 days, remaining constant from 2012 to 2016, against the background of + 2.8 percent p.a. average GDP growth.
Expanding payment deadlines globally
On a sample of 25,000 listed companies in 20 sectors and 36 countries, DSO has increased by 2 days on average globally, reaching 66 days by the end of 2017. Thus, a single company in four is paid by its customers in less than 31 days, and one in four is paid after 90 days. By comparison in 2016, one in four companies receives a payment within 88 days. The expansion of DSOs reflects a relaxation of business-to-business payment standards. As global economic health improves, companies tend to trust their customers to pay for them despite the growing insolvency of large companies.
From the perspective of the relative levels of the DSO, there are three main groups of countries:
- Countries with an average DSO of 51 days or less. The country with the lowest DSO worldwide is New Zealand with 43 days. Other countries with relatively short collection periods are the Nordic countries (Denmark and Finland), Austria and Switzerland, the United States, and finally the Netherlands (where there has been a four-day increase of the DSO due to strong growth in telecommunication, technology and support services).
- The group of the other 7 countries for which the DSO remains below the global average includes, among others, Germany (54 days), Canada (54), Brazil (62) and the United Kingdom (53 where the DSO remains stable despite the uncertainties at Brexit), while Russia is slowing down the DSO by 2 days to 56 days, with a quarter of companies being paid less than 22 days.
- Finally, the remaining group of 12 countries with an average DSO over the global average of 66 days, such as France (74), Italy (83), Romania (68). China records the highest average DSO (92 days). With an average DSO of 74 or 83 days, Portugal and Turkey remain closely monitored, as on average only one in four companies is paid after four months in these two countries.
If we turn our attention to the evolution of DSO by industry, we mention growth in sectors such as Aeronautics (+4 days in 2017, +12 days vs. 2012), Automotive (+3 days, +7 days), Construction (+3 days ) and Electronics (+3 days). Only 4 sectors record a stabilization of DSOs: Food, durables, Machinery and consumer goods, while the pharmaceutical and services sector has seen an improvement in DSOs.
The largest DSOs are registered in the sectors Aeronautics (72), Automotive (72), Machinery (87) and Electronics (91), the global average being 66 days. Immediately below the global average are the energy sector (63), the Metals sector (58) and the paper and cardboard sector (62). The opposite is the food sector (46 days), transport (49 days) and the durable consumer goods sector (49 days).