Brazil – High Bankruptcy Rate, High noncollectable Rate
Brazil had the lowest proportion of overdue B2B invoices in the Americas region. However, the percentage of past two invoices increased impacting 82.6% of survey respondents. The main reasons for payment delays are insufficient availability of funds and the complexity of the payment procedure. The proportion of uncontrolled B2B receivables stands at a high 2.5% and is largely driven by bankruptcies.
Credit sales made to enable domestic and international expansion
Historically, respondents in Brazil have been the most inclined to sell on credit terms in the Americas region. Despite a decrease of five percentage points this year, survey results point to the same open stance with 42.8% of B2B sales made on credit. Respondents are clearly more comfortable selling to domestic B2B customers than B2B customers abroad (50.0% versus 35.5%).
Credit sales are perceived as a way to ensure cash flow and grow business. Brazilian respondents also use these to nurture long-term business relationships and attract new customers. Customers, respondents in Brazil said that the financial weaknesses of the customer and the economic or political risk in the country would prevent them from selling on credit terms.
Trading on credit is essential for my company.
Survey respondent, Chemicals sector
Brazilian respondents use credit sales with foreign B2B customers to grow the business and nurture long-term business relationships. They believe that it is a way to reward business relationships and attract new customers. They do not offer their customers or their customers any business or payment performance.
We are able to attract new customers from abroad.
Survey respondent, Food sector
A higher proportion of overdue B2B invoices
Respondents in Brazil were less likely to report frequent payments by their B2B customers (87.9%). The frequency of late payments was much higher with domestic B2B customers.
More of their peers in the Americas, respondents in Brazil reported in the proportion of overdue B2B invoices. This expanded from 43.6% in 2017 to 45.5% this year. Despite the increase, Brazil had the lowest proportion of two B2B invoices in the region.
In 2018, the average Days Sales Outstanding (DSO) figures recorded in Brazil is 31 days. This is one day longer than in 2017 and the lowest DSO in the Americas region. 35.7% of respondents in Brazil said that they do not expect any changes in DSO over the next 12 months. A high percentage (29.1%) foresee a slight increase while 16.8% a slight decrease.
Domestic buyers are likely to receive less time to pay
In 2018, average domestic B2B payment terms (31 days). Foreign B2B customers, however, are given 30 days on average, to fulfill their payment obligations; three days fewer than in 2017.
47.6% of respondents in Brazil stated that they are likely to give their domestic B2B customers less time to pay invoices. A slightly lower percentage (37.2%) said that they are likely to differentiate payment terms. The main reasons for differentiating payment terms
In 2018, respondents in the country reported that domestic B2B customers delayed on average by 30 days, and foreign B2B customers by 34 days. This compares to 30 days and 31 days in 2017. Respondents in the country need on average, 63 days to convert B2B invoices into cash.
Payment delays by domestic B2B customers (cited by 55.8% of respondents). Goods delivered or services provided (23.1% of respondents) was the second most common reason for payment delays. Brazil had the highest percentage of respondents in the Americas region who stated insufficient funds as the main reason for payment by domestic B2B customers. Payment delays by foreign B2B customers were reported due to insufficient availability of funds (29.1% of respondents mentioned this) and the complexity of the payment procedure (26.2%).
Brazil had the second highest percentage of respondents (24.7%) who stated that payment delays led to revenue loss. Other consequences mentioned were the need to postpone payments (25.8%) and the need to pursue additional finance (25.8%). Only 17.4% of respondents in the country said that payment delays did not have a significant impact on their businesses.
The highest proportion of uncollectable receivables in the Americas
In 2018, Brazil remains the country with the highest average proportion of receivables of the countries surveyed in the region (2.5%). The percentage is unchanged since last year with domestic B2B receipts written off more often than foreign ones.
Uncollectable receivables originated most often from B2B customers in electronics, construction, business services and services. Customer recall of a business in Brazil (mentioned by 54.7% of respondents). The highest rate of respondents.
Brazil: bankruptcy proceedings and their effect on companies
Among the four countries surveyed in the Americas, Brazil has the highest percentage of receivables. 2.5% of the total value of B2B receipts was written off as unstable – no change from last year. The main reason for write-offs remains bankruptcy – and the percentage of respondents stating this went up from 53.4% in 2017 to 54.7% this year.
33.9% of Brazilian respondents believe that the ease of resorting to bankruptcy courts is positive for the viability of companies. 20.2% strongly agree with this while 30.3% are neutral statement. Only 9.2% disagree and 6.4% strongly disagree.
Similar findings were observed in relation to the effect of bankruptcy. 33.9% of Brazilian respondents said that they agree that the ease of resorting to bankruptcy courts is decreasing and 14.7% that they strongly agree with this statement. The majority of respondents (34.9%) were neutral. Lower percentages of respondents disagreed (10.6%) or strongly disagreed (6.0%) with this concept.
B2B customers in the construction sector some of the slowest payers
As mentioned previously, Brazilian respondents give their B2B customers 31 days, on average, to pay invoices. B2B customers in the sector seem to be paying faster (on average, 39 days) while they are being asked to pay faster (on average, within 18 days).
Suppliers in Brazil reported that B2B customers in the consumer durables and construction sectors were some of the slow payers. B2B customers in these sectors, paid on average 60 and 65 days after the two dates. The main reasons for the payment delays in consumer durables are the lack of availability of funds (reported by 46% of respondents) and the inefficiencies of the banking system (mentioned by 31% of respondents). The main reasons for the lack of availability of funds (mentioned by 45% of respondents), disputes over quality of goods and services and inefficiencies of the banking system (both reasons stated by 24% of respondents).
Looking ahead, most respondents in Brazil (45% and 51% respectively) expect improvement in consumer payment behavior in consumer durables and construction sectors.