Consequences of the coronavirus crisis on payment behaviour of European companies
The world is currently facing difficult times fighting the COVID-19 pandemic caused by the coronavirus, which not only is giving rise to a health emergency, but it is also threatening the global economy. In fact, in order to contain the virus as much as possible, substantial measures are being taken worldwide. Borders are being locked down, events are being cancelled and hairdressers, stores, and catering establishments are being forced to close. Despite these measures being necessary, because our health is paramount, they have major consequences for many companies. Entrepreneurs are becoming increasingly concerned about the economic impact. Indeed, no work means no income. Consequently, for many businesses, the corona crisis will also bring financial worries. We are therefore happy to advise you to ensure that payment problems are prevented.
The effects of a global downturn in economy on debt collection
As we all know, coronavirus started spreading from Wuhan, in China. As China was the epicentre of COVID-19 and one of the hardest-hit countries, it had to slow down its economy to contain the virus. However, China’s current disruption in production will also affect international companies. Indeed, the country plays an important role in global supply chains, as many manufacturers are located in China. Additionally, travel restrictions, quarantine and self-isolation measures, which are currently in place in most countries, will lead to significant decrease in consumer spending.
In order to protect your business during these times made uncertain by coronavirus, it is essential to be cautious and have a clear overview of your credit management and cash flow. Do you have an outstanding invoice from a client? If your debtor is also affected by the current situation, it is important for you to show sensitivity and understanding in your approach to debt collection. Besides, depending on the country where your debtor is located, it is important for you to be familiar with the government’s initiatives and the impact that the COVID-19 pandemic has had on that country. Keep reading to find out how you and your company should face the coronavirus crisis.
Sectors and industries most affected by the coronavirus
It is important to notice that not all the industries will suffer the same way because of the new measures in place to fight coronavirus. Airlines, hospitality, travel and tourism are amongst the sectors that are suffering the most. People are indeed highly recommended to stay home and to only travel when strictly necessary. Furthermore, many countries already closed their borders.
Other industries affected by the virus are gambling and gaming, automotive, transportation, services, manufacturing, mining, non-food retail, and construction. This crisis is mostly due to limitations and measures undertaken by several countries. Many businesses are forced to temporarily close to the public, in order to limit the virus from spreading. Apart from this, citizens are advised not to leave their houses or even prohibited from doing so, which reduces demand of services and the average spending of people.
Therefore, we expect an increase in debt collection cases arisen within the above sectors. Since we are not the only ones to expect this, measures are being taken to prevent insolvency and payment issues. You can read more about the measures taken by European governments to support their economy in this article.
Payment behaviour of different European countries
The economic instability caused by the coronavirus and COVID-19 pandemic may cause payment delays for companies in all countries. However, if you conduct business abroad, it is important to also be familiar with the usual payment behaviour of different European countries.
Companies in Northern and Western European countries usually have a better payment behaviour than the rest of Europe. Most of the Invoices are, in fact, paid on time. Punctuality might be harder to respect now due to the economic instability caused by coronavirus and the consequently restrictions each county put in place to contain the pandemic. However, most of the countries in these parts of Europe are not in full lockdown yet, and their economy is still going.
On the other hand, Southern European countries are known for having a lax attitude towards payment. Many companies, indeed, do not adhere to the payment terms. In addition to this, Italy and Spain are now in full lockdown because of COVID-19. Coronavirus is therefore an ulterior threat to Southern Europe fragile economy, and it might also worsen payment behaviour of companies located there.
For many years, companies in Central and Eastern Europe have not had a very good payment behaviour. However, things have been improving over the last years, due to the economic growth. However, the current situation may lead to payment delays. Poland and Hungary, for instance, closed their borders and suspended the activity of businesses operating in leisure, entertainment, education and catering. Romania has also announced a complete lockdown. As a result, many businesses may incur significant losses due to this disruption in their activity, which consequently may cause them difficulties in paying invoices.
Unpaid invoices due to coronavirus
Do you have an unpaid invoice because your customers have been highly hit by the measures taken against coronavirus and COVID-19 pandemic? Our debt collection specialists share their advice on how to deal with unpaid invoices during this coronavirus in this article.
Have you already started judicial debt collection proceedings? Or you are about to and want to do it correctly? Many courts, indeed, only handle urgent cases now. Find out if your case is postponed or will be handled online. Our international lawyers have made an overview of the current status in European courts and how it affects judicial debt collection.
Would you like further information about your outstanding invoice and debt collection case? Or would you like to know more about payment behaviour in the sectors and countries highly afflicted by coronavirus and the measures taken against it? Please do not hesitate to contact us. Even though our lawyers and debt collection specialists are following the coronavirus measures and working from home, we can still be reached in the same way as before. Our international debt collection specialists and lawyers are happy to assist you.