Eastern Europe businesses worry about profitability

Press release

A potential threat to profitability during the year ahead is the major concern for businesses polled across Eastern Europe. This is despite an expected rise in B2B sales.

The major concern expressed by companies polled across Eastern Europe is a potential threat to profitability during the year ahead. Although recovery of consumer and business demand is expected to lead to an increase in sales, many companies are uncertain this will translate into improved profits due to continuing pressure on their cost structures. This is despite a gradual easing of inflation. While 55% of businesses polled said they anticipate a rise in sales, only 39% expect profits to increase in the coming months.



PPB Eastern Europe 2023 - Expected Profits and Sales - chart



This uncertain mood is amplified by a significant worry that companies will incur higher credit risk management costs due to an expected worsening of customer payment behaviour in B2B trade. Businesses across Eastern Europe reported that these costs would be related to spending more time and resources chasing overdue invoices while also strengthening credit control processes. They said such an increase in costs would further dent profitability and could hamper business operations.

These are among the clear messages from businesses polled in seven markets across Eastern Europe, namely Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Romania, and Turkey for the 2023 edition of the Atradius Payment Practices Barometer survey for Eastern Europe.

Concern about potential cash flow issues impacting their financial health is another clear anxiety expressed by companies polled in Eastern Europe. 79% of companies said they expect Days-Sales-Outstanding (DSO) to either improve or show no change during the coming months. 21% expect a deterioration of DSO and potential liquidity bottlenecks. The DSO figure was already high, prompting many companies to shorten payment terms, enhance their long-term trade debt collection to keep liquidity in-house, and reduce the need for external borrowing that would further affect their cost structure.

To protect profitability amid this deteriorating credit risk landscape, many companies in Eastern Europe said they will place a greater focus on the importance of credit risk management in B2B trade. 49% of companies polled across Eastern Europe expect to continue with in-house retention and management of customer credit risk, but a potential downside to this approach is whether there will be enough reserves to absorb the hit of a large write-off, which could threaten business survival. This may explain why 20% more companies polled than last year said they would consider taking up credit insurance during the coming 12 months, to protect against the impact of defaulted receivables while also freeing up cash for business operations.

Thomas Langen, Senior Regional Director, Germany, Central and Eastern Europe at Atradius stated, “Even though inflation is easing, and its impact has also been mitigated a little by the strength of local currencies in Eastern Europe, there remains a heavy strain on the business environment. The threat of excessive pressure on costs will see profit margins shrink and company viability put at risk. Against this background, protection of receivables is of vital importance for businesses in all sectors. A strategic approach to credit management, involving credit insurance, can help companies to mitigate the impact of B2B customer credit risk on business operations and achieve growth through safe trading in the current challenging economic times.”

The Atradius Payment Practices Barometer survey for Eastern Europe was conducted between the end of Q1 and mid Q2 2023, and findings should therefore be viewed with this in mind.

The results provide a good insight into how businesses are paid by their B2B customers, and how they tackle the pain points caused by poor payment practices in the current challenging economic and trading environment. Both the regional and the individual country reports can be found in the Publications section of the Atradius website.


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