Indonesia’s more liberal trade credit policies in the year following the outbreak of the pandemic have led to an increase in late payments.
Although Indonesia experienced some of the highest rates of coronavirus cases in Southeast Asia last year, the pandemic’s impact on its economy has been relatively mild. This may be the reason businesses increased the use of trade credit following the outbreak of the pandemic and offered longer payment terms than in the past. This more liberal trade credit policies have led to an increase in late payments, with a higher percentage of the total value of invoices overdue than the regional average.
The Atradius Payment Practices Barometer provides us with the valuable opportunity to hear directly from businesses how they are coping with changed trading and economic circumstances caused by the pandemic. The survey questionnaire was completed by businesses in Indonesia during Q2 2021, a full year after the World Health Organisation declared Covid-19 a global pandemic.
Key takeaways from the report
Our survey in Indonesia shows that, in the year after the outbreak of the pandemic, local businesses adopted more liberal trade credit policies than in the past. In the context of Indonesia’s relatively strong economy, this is certainly an expression of business confidence, also in challenging economic times.
The increase in late payments from B2B customers due the more liberal trade credit policies was addressed by Indonesian businesses through a strengthening of their internal credit management processes. This points to a business environment that is highly receptive to strategic credit management as an essential tool to protect cash flow and minimise the likelihood of bad debts.
That said, the future is looking comparatively bright for Indonesian trade and commerce.
The economy is forecast to rebound by nearly 5%, dependent on the efficacy of the vaccine rollout. Respondents to our poll were likewise optimistic about the coming months with many more businesses anticipating growth than their peers across Asia as a whole, as well as a more frequent use of trade credit with B2B customers to stimulate demand.
Key survey findings for Indonesia
- Indonesian businesses' B2B credit sales increased significantly in the year following the outbreak of the pandemic
- B2B customers of Indonesian businesses enjoyed longer payment terms than in the past, most often reflecting company standards
- Late payments from B2B customers hit Indonesian businesses harder than rest of Asia
- Increased costs of credit management and trade debt collection reported by local businesses
- Looking ahead, Indonesian businesses anticipate growth stemming from domestic economic rebound
Interested in getting to know more?
For a complete overview of the payment practices in Indonesia and in the local agri-food, chemicals/pharma and consumer durables industries, please download the complete report.