Survey: Majority of CFOs See Increase in Customer Payment Defaults

Even if it feels like your business has everything it needs to succeed, you’re probably still dependent on customers, vendors, suppliers and others to ensure that your company is able to grow and thrive. One recent survey suggests that not every CFO feels confident that their business networks will thrive as the COVID-19 pandemic continues to rage across the world.

Background: Last week, credit insurer Euler Hermes Americas published the results of a survey for which the firm polled 250 US CFOs and their direct reports. Half of the respondents were from small companies (revenues of $5 million to $25 million) and half from medium-sized firms (revenues of $25 million or more). The company had asked these CFOs specific questions last fall, and then asked the same questions again in May to determine how the finance professionals’ attitudes had changed based on the coronavirus’ impact on them.

Workplace Safety a Key Concern

The three most pressing recent concerns of CFOs are workplace safety, supply chain disruption and a lack of predictability around regulatory changes and fiscal stimulation, the report notes. Interestingly, Euler Hermes adds that workplace safety wasn’t listed as a concern of a single business back in the fall, showing just how stark the impact of the coronavirus has become.

Needless to say, cash flow is still on the minds of CFOs all over the country, as some businesses are still unable to open or are restricted in the type of operations they can perform. Some 61 percent of survey respondents say they’ve seen their customer payment defaults increase when compared to the same time last year. In fact, some businesses say defaults have risen as much as 100 percent.

“If businesses can’t grow and trade on a global scale, that only exacerbates the slowdown we are seeing in the world economy,” said James Daly, CEO of Euler Hermes North America. “In just a few months, we have seen business leaders restrict credit terms and slash expansion plans.”

Companies Build New Risk Strategies

The COVID-19 pandemic has not only prompted businesses to pivot their existing operations, but it has also led companies to build new strategies for the future. Some 94 percent of CFOs say they plan to adjust their overall risk strategies to prepare for future crises, the survey noted. These changes are expected to include restricting the credit terms they extend and shifting overall business policies.

In particular, Euler Hermes reminds businesses to be extremely cautious when instituting stricter payment terms, because this can cause business losses in the future, said Daly. “Risk postures like these typically end up worsening cash flow problems they set out to solve,” he said. “This is why it’s so important to prepare for every scenario via thorough knowledge, business partners and a toolset that will simultaneously mitigate risk and stimulate growth.”

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To check out the results of the survey, visit the Euler Hermes website.