Allianz Trade: Global Payment Terms Extended in 2023

Global payment terms and corporate financing needs reached record highs in 2023, according to Allianz Trade's latest report. Worldwide Working Capital Requirements (WCR) increased for the third consecutive year, reaching 76 days of turnover, a rise of two days compared to 2022. This trend is attributed to softer economic growth and higher operating and financing costs.

The Days Sales Outstanding (DSO) emerged as a key driver, increasing by three days to 59 days in 2023. This marks the largest annual jump since 2008 and nearly doubles the increase seen in 2022, indicating that more companies are experiencing longer waits for payments, which elevates cash flow risks. Globally, 42% of companies reported DSO exceeding 60 days by the end of 2023.

"Half of the countries in our sample saw an increase in WCR in 2023, with two out of five crossing the global average, notably France and Germany in Western Europe, and China and Japan in APAC," stated Maxime Lemerle, Lead Analyst for insolvency research at Allianz Trade. Regional WCR stood at 81 days in APAC, 69 days in Western Europe, and 70 days in North America.

Furthermore, the report highlights that declining profitability could lead to further extensions in payment terms, particularly in Europe. Allianz Trade's analysis suggests a 1 percentage point drop in profitability could increase payment terms by over seven days. European companies are advised to prepare for longer payment cycles, which may strain cash flows and increase the risk of non-payment.