Although the number of companies complaining about unreliable business partners slightly decreased in the third quarter, business arrears have significantly increased, according to data from the Debtor Register of BIG InfoMonitor and BIK. Outdated business obligations to contractors and banks rose by PLN 1.25 billion in just two summer months and exceeded PLN 42.5 billion by the end of August. At the same time, the percentage of companies reporting delays of over 60 days in the inflow of receivables fell from 42% in the second quarter, to 35% in the third quarter, as shown in the periodic “SME Scanner, companies’ payment backlogs” study. However, the construction, and services sectors have reported improvements in this regard. The rest of the industries do not see changes for the better.
The rise in business arrears this year accelerated significantly, with July being one of the record months. During that period, over PLN 1 billion in additional overdue payments to suppliers and banks appeared in business accounts. From the beginning of the year until the end of August, unpaid receivables rose by over PLN 3 billion to PLN 42.5 billion. A total of 313.25 thousand companies (active, suspended, and closed) are experiencing problems, 1.9 thousand more than at the end of last year. The statistics are influenced by receivables reported to the debtor register run by BIG InfoMonitor and visible in the BIK database as at least 30 days late on a minimum amount of PLN 500 loans.
Loans have recently failed to a large extent in micro companies from the service and trade industries. In the case of small and medium enterprises, the value of overdue loans in trade and production has increased. On the other hand, service and construction companies have been recording timely servicing of their loan obligations. The size of the company matters greatly for the quality of credit servicing – The smaller the scale of operations, the bigger the problems with repayment of installments and other obligations,” warns Sławomir Grzelczak, President of BIG InfoMonitor.
The number of reports checking businesses rose by a fifth
“Unfortunately, economic conditions do not favor businesses and the data on arrears are the best proof of that. The financial condition of companies is deteriorating and mutual trust is falling. Entrepreneurs are becoming more cautious when it comes to sales with deferred payments and are more likely than before to check their contractors if they are not debtors. This year, the number of reports about other companies downloaded by businesses has increased by 20 percent compared to last year,” adds Sławomir Grzelczak.
There is no shortage of reasons to check the financial condition of a customer and supplier, whose unreliability can also seriously harm businesses. It’s worth noting that in transportation, 1.2 thousand unreliable debtors have been added since the beginning of the year, and in industry and professional and scientific activities, there are more than 600. Even in construction, where the amount of arrears has changed only slightly, there are more than 500 companies with overdue obligations than at the end of 2022. Debts are piling up and waiting for an improvement in liquidity, mainly in companies involved in professional, scientific, and technical activities (e.g., holdings, architects, consulting, research and development, and design). The arrears of this industry have increased by 15%, which is twice as much as the overall firms.
Businesses in the Information and Communication category recorded over an 11% change, those in Transportation and Real Estate Management over 10%, and Industry and Trade, and Accommodation and Catering sectors just under 9%.
“For now, there are no reasons to expect an improvement in the situation in the near future, particularly with companies focused on domestic market sales, as consumption remains at a lower level than last year. Currently, only those supported by a weak zloty, as well as a part of construction companies, benefiting from the revival caused by the 2% Loan, can think about better prospects,” predicts Sławomir Grzelczak.
According to GUS (Central Statistical Office of Poland), in September, representatives of the branches – Industry, Construction, Wholesale Trade, Retail Trade, Transportation and Warehousing, Accommodation and Catering, Information and Communication, Finance and Insurance – rated the business condition as similar or worse than a month earlier. Except for retail trade, the general business climate indicator is below the long-term average. Over the year, the majority of the presented economic areas are increasingly troubled by insufficient demand (mainly in accommodation and catering) and high employment costs. The feeling of uncertainty about the general economic situation, however, has diminished, although it remains at a high level. The Central Economic Information Center (COIG) reports a record number of announced company restructurings each month. Debtors most often initiate proceedings for the approval of the arrangement in a simplified form.
More than half of trading companies have difficulties with timely obtaining payments from contractors
The effectiveness of debt collection matters in the difficulties with settling obligations, and it has recently improved slightly, but unfortunately not for everyone. Compared to the second quarter, the percentage of companies complaining that they had to wait at least two months for payment in the last half-year fell from 42% to 35%, according to the periodic SME Scanner study carried out by the Keralla Research Institute for BIG InfoMonitor. The change is mainly thanks to the construction sector, where the share of entities reporting such problems fell to a record low level of 9%. Improvements are also reported by service companies, where in the second quarter, about 40% of companies had problems, and in the next quarter, only 23%.
In other sectors, the situation was similar to that in spring – in industry, one in three companies struggled with unreliable customers; in transport, nearly 4 in 10; and in trade, more than half. The latter sector has long had the worst B2B settlements.
“Although patience is a great virtue, it completely fails in such situations. Waiting only shows that someone can afford to postpone our invoice for later, and the money first goes to those who claim it: companies that have a stamp on their invoices indicating that in case of non-payment, the debtor will be entered in the BIG debtor register; companies that call, talk, inform that they can enter the contractor into the debtor register, or entrepreneurs sending a payment request with a pledge to enter the debtor register, which really works well. Almost half recover money within 14 days of sending the request, show SME studies,” says Sławomir Grzelczak.
The study was carried out as part of the “SME Scanner” project by the Keralla Research Institute, conducted quarterly among micro, small, and medium companies. The sample size is 500, over the phone, and was conducted in July 2023.
