The European Payment Report: 12% of business receivables in Bulgaria are paid late

Bulgaria is among the European countries with the highest share of overdue payments to businesses, according to this year’s European Payment Report (EPR), which summarizes data from a survey of managers in 25 countries. CEOs of companies answer questions about overdue payments and business conditions over the past year and their expectations for this year.

The proportion of overdue payments to Bulgarian companies is 11.7%, putting the country on par with the Czech Republic and Sweden. The worst situation is in Serbia and Slovenia (see the chart), while Portugal has the fewest complaints about delayed payments.

Technology is increasingly being integrated into the management of overdue payments, and uncertainty among European businesses has not subsided, is another important conclusion in the EPR. The study was conducted among the management of nearly 10,000 companies and tracks their attitudes and expectations related to liquidity, overdue payments, and business conditions.

After years of high inflation and tight monetary policy, companies have reason to believe that Europe has finally entered into a period in which economic momentum has been strengthening, the report notes. In the first months of the year, however, a new wave of uncertainty has reached Europe. Periods of uncertainty have forced corporate directors to prioritize liquidity, cash flow, and flexibility. In the EPR, it is stated that in an unpredictable trading environment and rising bankruptcies in some sectors in Europe, this flexibility is crucial for the survival of companies. Therefore, they are increasingly hampered by delays in customer payments and estimate that around 11% of their total revenues are paid late.

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More than one-third of the surveyed CEOs have said the delay has been as bad as it had been during the extraordinary economic shock caused by the COVID-19 pandemic. Last year, European companies have delayed receivables worth around €10.5 trillion at any given time.

There has been no significant change in recent years in the period between agreed and actual payment for companies partnering with other businesses and end customers. There has been a decrease mainly for those working with the public sector, and the explanation can be found in initiatives introduced to support small businesses during the pandemic, the report says.

Several approaches have been adopted by companies in an attempt to reduce overdue receivables. Almost 8 out of 10 participants in the survey have spoken about facilitation through an improved payment interface on their platforms and introducing convenient payment methods for clients. Approximately the same number have invested in data analysis to predict trends in delayed payments. Experts believe that artificial intelligence facilitates receivables management.

Another step that companies take against the risk of delayed payments is to change payment terms. In this year’s EPR survey, 56% of CEOs have said they had accepted unfavorable payment terms to maintain commercial relationships. In 2021, this figure was 49%. The goal of longer payment terms is to prevent financial difficulties for clients. These data help explain why almost half of all companies are currently introducing more rigorous payment terms in a business environment they perceive as more favorable for their clients.

On the macroeconomic level, concerns about stagflation among European businesses are growing, due to strong inflationary pressure and higher borrowing costs. European governments have abandoned plans to tighten public finances and instead increased fiscal spending, especially for defense purposes. These expenses could support economic recovery over time, allowing European countries to emerge from industrial stagnation, but this will not happen quickly, the report further states. The short-term effect will be inflation and suppressed growth.