Taiwan: sharp rise in bad debts

Introduction

The 2022 edition of the Atradius Payment Practices Barometer survey findings for Taiwan is a valuable opportunity to hear directly from companies about how their business operations are coping with the disruptive impact of the current challenging economic and trading circumstances.

Topics covered include: payment terms set for business-to-business (B2B) customers, the average time it takes to turn overdue B2B invoices into cash, the impact of late or non-payment on the business, and expected challenges to profitability during the coming months.

The survey questionnaire was completed by businesses in Taiwan during Q2 2022. Responses given by companies polled are contained in the report for Taiwan, which is part of the June 2022 edition of Atradius Payment Practices Barometer for Asia available on this website by clicking here.

Key takeaways from the report for Taiwan

Major concern amid geopolitical issues, rise in payment defaults

• The situation in Taiwan is in a state of flux, with many companies telling us they are unsure what the future holds. This is partly a result of the pandemic and, more significantly, due to the specific geopolitics of Taiwan itself, of widespread and acute uncertainty across all industries polled about its potential impact on domestic and foreign trade. One third of companies said they had anxiety about maintaining profitability.
• Our survey showed a sharp rise in bad debts written off as uncollectable. They nearly tripled, up to an average of 8%, while in the chemicals industry it was as high as 12%. There was an equally worrying increase in the number of overdue B2B invoices, revealing a disturbing deterioration in payment practices. The level of customer payment defaults climbed to an average of 54%, up from last survey's 40%.

DSO troubles and liquidity issues spark need for strong credit management

• A clear majority of businesses polled in the Taiwan market told us that liquidity issues are a growing factor leading to B2B customer payment default. This had a severe knock-on effect through the respective supply chains. Almost one third of companies told us they experienced a significant deterioration in Days-Sales-Outstanding (DSO), a threat to both cash flow and to business growth.
• The tough trading conditions found in the survey reinforced a rising awareness among companies polled in Taiwan of the need for a credible and strong credit management strategy. There was focus on the internal credit process to manage payment defaults and a notable rise in businesses who either outsourced the issue to a credit insurer or who purchased specific trade finance solutions.

Key survey findings for Taiwan

• B2B trade on credit climbs amid competitive pressures
• Credit risk worsening is a worry, and companies seek insurance protection
• Companies rocked as payment defaults and bad debt losses soar
• Liquidity squeezes trigger increase in customer payment default
• DSO troubles spark concern about growth and profitability
• Mixed opinions on evolution of B2B trade credit landscape
• Serious concern geopolitical risks will hurt domestic and export trade

Interested in finding out more?

Please download the complete report for a complete overview of the payment practices in Taiwan and in the following local industries:

• Chemicals/Pharma
• Electronics/ICT
• Machines
• Textiles/Clothing