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Abstract

Illiquidity has been an acute, structural problem in Serbia for years, even decades. Depending on the point of view, this phenomenon is a cause, but, also, a consequence of collection of receivables that has been collected with delay. In the root of this problem there are: chronic crisis, unreformed public sector, slow develop of new economy structure, weak institutions and relatively good law solutions that are applied selectively and ineffectively. Part of the research “European payment habits”, done by EOS Matrix company, is presented in this analysis. A sample of 200 domestic company managers was used in the research, and the results shown in this analysis refer to the display of average payment deadline for receivables in Serbia for the year 2016. compared to the other European countries and EU, as well as structural display of receivables from the perspective of collecting and the overview of basic reasons that are being presented as an excuse for the payment delay.
ECIN 2017 57
Ivan Nikolić1
Sonja Jaćimović2
Original Scientific Paper
Analysis: Collection of receivables: Serbia vs Europe
Abstract Illiquidity has been an acute, structural problem in Serbia for years, even decades.
Depending on the point of view, this phenomenon is a cause, but, also, a consequence of collection of
receivables that has been collected with delay. In the root of this problem there are: chronic crisis,
unreformed public sector, slow develop of new economy structure, weak institutions and relatively
good law solutions that are applied selectively and ineffectively. Part of the research “European
payment habits”, done by EOS Matrix company, is presented in this analysis. A sample of 200
domestic company managers was used in the research, and the results shown in this analysis refer to
the display of average payment deadline for receivables in Serbia for the year 2016. compared to the
other European countries and EU, as well as structural display of receivables from the perspective of
collecting and the overview of basic reasons that are being presented as an excuse for the payment
delay.
Keywords: Collection of receivables, outstanding debt delays, illiquidity, payment habits
1. Introduction
Considering the fact that illiquidity is actually consisted of receivables that is recovered with the delay,
we should know the number of receivables whose payment is delayed, as well as the average time of
the delay. There are several forms of illiquidity, therefore several forms of payment delays (The
Australian Small Business and Family Enterprise Ombudsman, 2017):
- Payment delays toward other companies
- Payment delays toward bank
- Payment delays toward state
- Payment delays toward employees
The amount of all these payment delays provides the true illiquidity information. In order for a serious
debate on illiquidity issues, it is necessary to have each information considering every form of payment
delays analysed separately. Reliable information, considering the amount of unpaid obligations, exists
only in the case of credit obligations (Federation of Small Businesses, 2017).
On the stable market, which is characterized by the low degree of concentration, the prices of the
same goods are relatively the same and the competition between companies is more focused on the
segment of credit line conditions and collecting, than on the prices itself. In that mater, selling the
product based on the credit line, beside the fact that the company is, in the terms of accounting,
converting one form of property (stock) into the other (claim), financially it is deliberately postponing
the moment of receiving cash money for the sold products (Ernst & Young Global Limited, 2017).
Growth of certain expense categories due to the delay of receiving cash money includes:
immobilization expenses of assets in the claim, explicit spending of money and time for the record,
control, manipulation and collection of receivables, direct loses due to the impossibility of collecting the
debt (CRIBIS Dun&Bradstreet, 2016; Federal Reserve System 2016).
Expenses of the credit line, came from tied up company’s property, are becoming the seller’s burden
(creditor) and for the buyer represent a form of the discount on the price, therefore the financial
consequences of the payme nt delay are referred to (Edgar, Dunn & Company, 2017):
1
Economics Institute, Belgrade,Serbia ivan.nikolic@ecinst.org.rs
2
Economics Institute, Belgrade, Serbia
58 ECIN 2017
- expenses growth of holding the receivables on which the creditor didn’t count on
- appearance of losses due to eventual impossibility of recovering some parts of receivables
From the aspect of financial control of the collection of receivables, time of the outstanding debt
holding is more important in total, than average. Total time recurred for collection of receivables
includes the delayed, hardly collectible and, also, the uncollectible receivables (Atradius 2017).
2. Research methodology
For the requirements of this analysis CATI (Computer assisted telephone interviewing) method has
been used. It included 200 respondents (managers on the leading functions in domestic companies).
The research included questions considering controlling the receivables, as well as the questions
about the payment practice of their clients. Received indicators in Serbia were, after processing,
compared to the results of the research conducted by “EOS Matrix” for the same fiscal year in several
European countries, such as: Great Britain, France, Spain, Greece, Romania, Russia, Slovakia,
Bulgaria, Poland, Hungary, Belgium, Croatia, Austria and Germany (EOS, 2016).
3. Results and discussion
Companies in Serbia are showing generally bad payment practice. Every third account is not paid on
time. When the buyers miss the payment deadline, companies must wait 50 days in average, which is
by far the longest amount of time throughout Europe (21 day average).
Interesting fact is that, when it comes to western European countries, the longest delay for collecting
the receivables are German (23 days) and for the eastern Europe is Greek companies (26 days).
However, in Germany the deadline for settling money obligations, from the day the debtor received the
invoice, regarding the second request for payment by the creditor who has fulfilled his contracted
obligation, in average is the shortest from all the countries included in the research, and is 23 days. In
Greece this deadline is 48 days, almost the same as in Serbia.
It should be noted that in Serbia there is a great difference in payment practise between private and
business buyers: payments on time towards private clients is on the European level, while payments
time in the business sector is one of the lowest in Europe.
Picture 1. Average payment period for timely paid receivables in 2016, in days:
Soruce: Author’s calculatin on the basis of European Payment Practices 2016, EOS Survay
Germany
Austria
Poland
France
United Kingdom
Belgium
Croatia
Bulgaria
Hungary
Slovakia
Russia
Romania
Spain
Serbia
Greece
23 31
33
34
35
35
36
36
38
38
38
39
40 43
48
ECIN 2017 59
Private clients have payment deadlines in days on the eastern Europe average level (30 days) and
hold the average European standard for settling their obligations on time (79%), and show the best
practice in Europe when it comes to short term payments.
As opposed to them, business clients in Serbia have almost the longest payment deadlines in Europe
(46 days), right after Greece (51 days). For just 12% of the invoices, payment deadlines are shorter
than 30 days. Looking by the sector, the worst payment habits are in the trading sector.
Table 1 Structure of receivables from the aspect of payments in %, in 2016:
Timely
payments
Unpayable
Timely
payments
Late
payments
Unpayable
total
Business sector
Europe-average
77
3
76
21
3
Eas. Europe-
average
74
4
73
23
4
Poland
78
3
77
20
3
Slovakia
73
5
73
23
4
Bulgaria
72
4
70
26
4
Romania
73
4
72
24
4
Hungary
75
5
74
21
5
Croatia
78
3
77
20
3
Serbia
69
4
67
29
4
Source: ibidem
Serbia is, averagely, on the top of the European list when it comes the percentage of received
payments, where, almost, every third invoice is not paid on time (31%), (business sector 33%).
Percentage of the delayed and unpayable receivables, looking by the sector, is highest in the trading
sector (36%).
On the other hand, settling the invoice in days after the received deadline, in Serbia takes 2.5 times
longer than the eastern Europe average: 50 days Serbia towards 21 day everybody else, respectively.
Again, in the trade sector, after the expiration of payment deadline business clients averagely settled
receivables after 55 days, while in the service sector, looking in total, it was even longer (63 days).
As well as eastern Europe, in Serbia are mostly listed: shortage of liquidity and unfulfilled obligations
of buyers, as reasons for the delayed payment. Interesting fact is that only 13% of managers that took
part in this research said the reason for the delayed payment, or not paying at all, is, actually,
deliberate non-payment.
4. Conclusions
This paper indicates the llliquidity as serious structural problem in Serbia, which is, at the same time, a
cause and a consequence of delayed collection of receivables. The presented results, which refer to
the comparison of average payment deadline for receivables in Serbia and other European countries
clearly, indicate the extended payment practice (50 days in relation to 21 days, respectively). This
extension is especially obvious in case of payments to the business sector, which are at the lowest
level in Europe. Observed by sectors, percentage of the delayed and unpayable receivables, is at the
highest level in the trading sector. Furthermore, the results indicate, significatly longer period for
payment after the received deadline. Shortage of liquidity and unfulfilled obligations of buyers are
pointed out as the main causes of delayed collection of receivables, among which many are hardly
collectible and even uncollectible receivables.
60 ECIN 2017
References:
Atradius (2017), Atradius Payment Practices Barometer
EOS Survay (2016), European Payment Practices
Ernst & Young Global Limited (2017), New Payment Practices and Performance Regulations - Is your
business ready?
CRIBIS Dun&Bradstreet (2016), Payment Study 2016
Payment Times and Practices Inquiry - Final Report, 2017, The Australian Small Business and Family
Enterprise Ombudsman,
Edgar, Dunn & Company (2017), Payment trends in the European retail sector, Fifth Annual Retailer
Survey
Strategies for Improving the U.S. Payment System 2016, Federal Reserve System - Strategies Paper
Federation of Small Businesses (2017), Time to Act: The economic impact of poor payment practice
... In scholarly works for receivables trends explanation is used the information about the share of bad debts in settlements between enterprises (in Western European countries the average share was 1,3% in 2018 [8]) and the share of debt arrears and bad accounts receivable (in the EU the share of debt arrears is 20%, bad accounts receivable is 3% [9]). The above mentioned information has only a certain explanatory valueit is one among many other reasons for the excessive level of receivables. ...
... Particularly in Serbia the fundamental causes of excessive receivables (except macro-financial ones) are the unreformed public sector, weak institutions and selective law enforcement [9]. The above mentioned factors are also typical for Ukraine. ...
Article
In accordance with the established approach, excessive receivables are a manifestation of the crisis situation with inter-company settlements whose fundamental reason is the lack of liquidity and capital in the economy. Freezing cash into receivables slows down capital flows in the economy, generates systemic risks and negatively affects the companies' investment activities. In this article, excessive receivables are defined as the excess of the share of receivables in assets over its normal level, which is typical for a particular country's model of business financing, with due regard to sector specificity. The author analyzes causes and consequences of the abnormally high amounts of recei¬vables in Ukraine. Among the reasons for excessive receivables in the assets of Ukrainian companies are low payment discipline and difficulties in recovering debts, whose manifestations include a large proportion of overdue and bad debts. The emphasis is made on slowing settlements and increasing burden of receivables in the country. Decomposition of aggregated receivables for goods, works and services based on company size shows a shift in the non-payment burden towards small and medium-sized businesses, whose manifestation is the extension of repayment terms. At the same time, more than a half of the receivables in Ukraine's companies accounts for other receivables that are not directly related to the companies' operative activities, which is one of the manifestations of business financialization. Compared to foreign countries, the above share in Ukraine is abnormally high, due to the active use of shadow loan capital schemes by companies, including the laundering of "dirty" funds and the injection of capital from offshore to support business liquidity. Solving the problem of excessive receivables requires overcoming the existing liquidity shortage in Ukraine, increasing money supply based on gradual reduction of this government debt dependence and restoring business confidence in the banking system of Ukraine. The publication is prepared for the implementation of the planned project of the Department of Finances of the Reals Sector in the Institute for Economics and Forecasting of the National Academy of Sciences of Ukraine: "Financial Risks of Doing Business in Ukraine: Sector of Nonfinancial Corporations" (state registration No 0118U006088).
European Payment Practices
  • Atradius
Atradius (2017), Atradius Payment Practices Barometer EOS Survay (2016), European Payment Practices
New Payment Practices and Performance Regulations -Is your business ready?
Ernst & Young Global Limited (2017), New Payment Practices and Performance Regulations -Is your business ready? CRIBIS Dun&Bradstreet (2016), Payment Study 2016