Businesses in the UAE have reported that 60 percent of business-to- business (B2B) invoices are not settled on time, higher than the Asian average of 50 percent.
It also took businesses an average of 40 days to collect payment from overdue invoices, and eight percent of them were write-offs.
According to Atradius, which conducted a survey for its Payment Practices Barometer in China, Hong Kong, Indonesia, Singapore, Taiwan and UAE slightly more than half of the businesses (52 percent) reported an increase in administrative costs associated with the management of accounts receivable.
The survey revealed that the value of sales through open credit in the UAE dropped year-on-year, from 64 percent to 50 percent, which Atradius said may reflect a contraction in sales amid the pandemic.
More businesses in the UAE (37 percent), increased the frequency of using open credit compared with the Asian average (26 percent).
“Encouraging repeat business and winning new customers are the two most common reasons for the use of open credit, highlighting the pivotal role that this practice plays in enabling trade,” Atradius said.
Fifty three percent of UAE businesses also believe that their day sales outstanding (DSO) will decline over the coming months compared with the Asian average, which was 37 percent.
Looking forward, half of businesses surveyed in the UAE are optimistic about an improvement in their business performance over the next 12 months.
Schuyler D’Souza, managing director Middle East, Atradius, said: “The optimism among surveyed UAE businesses on their performance may reflect future opportunities in the UAE’s credit sale market, as the economy is supported by one of the world’s highest COVID-19 vaccination rates as of late May.
“However, expectations of a rapid rebound may be fragile amid valid concerns about challenges to business profitability. Under these circumstances, businesses in the UAE should assess how to strengthen their credit management processes to be more comprehensive and efficient,” he said.
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© ZAWYA 2021