Starting to export: which countries pay quickly?

• Exclusive Allianz Trade data guides companies starting to export by showing which countries have a culture of fast (and slow) payment. It found that Italy is the slowest to pay, taking an average of 66 days.
• Companies can reduce the risk of slow export payment – but must also reduce the risk to their cash flow if overseas customers fail to pay at all.
• There’s a long list of issues to consider when starting to export, from customs declarations to currency rates. But there’s one that needs to be at the top of the list: getting paid.
  

What the data says about getting paid when starting to export

Exclusive data from Allianz Trade can bring clarity. Based on 36 countries and drawn from a panel of 24,000 listed companies worldwide, the data identifies which countries have a culture of prompt payment of business invoices – and which process payments at a snail’s pace.

It's valuable market intelligence when any company is starting to export or planning to launch in new export destinations.

Export payment speed by country

Where you choose to export can depend on the sector you’re operating in. For instance, mid-sized engineering firms in the UK may be looking at Spain or Italy, which are traditionally strong export markets for this sector. Official data shows UK exports of machine tools and electronic equipment to these two countries exceeded £1bn in 2020.

But any firm starting to export needs to know that companies in Spain and Italy are among the world’s slowest to pay. The typical business invoice in Italy waits 66 days to be paid, making them the slowest to pay globally, with Spain being ever so slightly faster, taking 62 days. Export the same equipment to the Netherlands and, on average, payment will arrive just over a month earlier.

Allianz Trade calculates these figures using days sales outstanding (DSO) data from 24,000 companies in 36 countries. As mentioned above, Italy is the slowest, with Korea being the fastest, taking an average of 27 days.

There are important caveats. Due to a lack of available data, a few important UK export markets are missing, including Ireland. Payment speed is also influenced by sector. Suppose you're in an industry with notoriously slow payment, such as chemicals and pharmaceuticals. In that case, late payments for exports may be standard no matter which country you choose.

The impact of culture on export payments

Culture is an important issue to consider in exporting and plays a part in the speed of payment. The data shows a clear dividing line in Europe between the prompt, efficient payment in the north and the more relaxed timescales accepted in the south.

In this respect, the UK is firmly in the Northern European tradition. Although UK SMEs (quite rightly) complain about delayed payments, the data proves that UK plc is a relatively prompt payer by global standards, taking on average 38 days to settle an invoice. That's above a Western European average of 42 days, and several days faster than neighbours Germany (45 days) and France (58 days).

National payments behaviour changes slowly. The global average stretched to 36 days, from 66 in 2020 (the pandemic had a considerable impact on payment times), but slow-payment countries saw payment times stretched even longer. For example, in Mexico, payments went from 45 days to 50.

Export payment: getting paid faster

Companies exporting to countries where slow payers are common can take steps to reduce risk. For instance, France is often considered a priority export market for UK firms selling perishable goods or those where transport costs are high relative to their value. However, the average payment time is an extensive 58 days, making it the third slowest to pay. In part, this is due to local payment terms: some contracts stipulate payment will be made 45 days after the end of the month an invoice is received. This means payment may be received a long time after invoice and still be within contract terms.

What can UK exporters do to avoid late export payments? One step is to ensure that expectations are understood at the start of any international trading relationship, backed up with unambiguous contracts and other paperwork. A “retention of title” clause that allows the goods to be seized if payment is not made can be effective in some situations.

Another solution is for exporters to use financing solutions such as invoice finance, which means they get paid just a day or two after sending an invoice. Our Invoice Finance Buyer’s Guide focuses on domestic payments, but most of its advice is relevant for export finance too. As the guide explains, some variants of invoice financing allow the messy business of chasing customers for payment to be, in effect, outsourced. This can be doubly helpful if there are time zones or language barriers to wrestle with. However, invoice finance comes at a cost that is likely to be higher for countries with poor payment records.

Starting to export? Make a shortlist

Payment speed is important, but there are many other factors to consider when selecting a target export market. So, what's the best way of creating a shortlist?

You can start by looking at the UK's top trading partners or those countries with which a post-Brexit trade deal has been signed or is under negotiation.

Then you can look at which are traditionally export markets for UK manufacturers of specific sectors. Based on the data, you can determine which looks like a better prospect if you want to avoid late payments when starting to export. For UK food exporters, for example, France, USA, Netherlands, China, Germany and Australia are all top export destinations. Within those, you can list the speed of payments to help narrow down your targets.

Get help starting to export, and find out more about export payment

Although this data can help understand the risk of late payments for export, it does not quantify the risk of non-payment, which may be a severe threat to cash flow. Trade credit insurance can help you address this risk. For those starting to export, it can provide protection not only in the event of customer default, but against other events such as governments cancelling contracts, or imposition of export controls that make contract fulfilment impossible.

To explore this in more depth, visit our Trade Match online tool. This gives a detailed look at the data and also shows year-on-year trends.