Late payment trade debt reached 73% of the total, reaching almost 350,000 million euros, according to the Cepyme indicator
High inflation has had a full impact on the accounts of Spanish companies, whose trade debt in arrears in the first quarter is already close to 350,000 million euros, 42% more than in the same period of the previous year. Data from Cepyme published this Tuesday shows that the number of arrears in Spain has increased by 3 points compared to the last quarter of 2021.
The indicator, which measures the increase in late payment invoices and the extension of payment deadlines, shows that trade debts with delays already amount to 73.3% of the total and reach a volume of 348,992 million euros, 42% more than in 2021.
According to the Spanish Confederation of Small and Medium Enterprises, Cepyme, the slowdown in the recovery of the economy and the unfavorable impact of inflation on the accounts continue to negatively affect the development of non-performing loans
The default rate is at the 2018 level, having started declining so far in early 2019. In Cepyme, they explain that this level of delinquency has a “double cost” for companies. On the one hand because of the financing difficulties to cover the payment arrears and on the other hand because of the required default interest, which is estimated at 1,800 million for this period, taking into account an average payment arrears of 23.9 days and a statutory default interest of 8%, 50% is more than in the first quarter of 2021.
And it’s that the average payment term has risen to 83.9 days, compared to the already high 81.4 from the previous quarter. “This sharp increase is due to the slowdown in the economy, which is affected by the escalation in prices and the consequences of the conflict in Ukraine,” the businessmen explained. According to their data, companies “don’t pass on all of their cost increases to the end customer, which translates into shrinking cash flow, impacting the ability to pay suppliers.”
A growing number of companies are recognizing this problem and are negotiating with their suppliers to extend payment terms. This situation would explain the increase in the average payment term in the first quarter and makes the forecasts in this respect negative, they indicate from Cepyme. According to his forecast, tensions in energy prices will continue at least until next spring and as costs rise, there will be additional pressure on operating margins, raising the risk of non-payment or delays in meeting obligations in the coming months.
All this in a context dominated by uncertainty and in which central banks are determined to curb inflation with rate hikes, which are already being implemented by the Fed in the US and the ECB in Europe. “This will translate into higher borrowing costs and more difficult conditions to access this funding, which will complicate the ability to access external funding to address funding shortfalls,” they point out.
Source: La Verdad
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