Taiwan: shifting trend in B2B trade credit use

Introduction

The survey was completed by Taiwanese businesses during March 2020. At this time the country was successfully containing local transmission of the coronavirus through a series
of measures including testing and quarantines that started in December 2019. However, despite such containment successes, Taiwan’s dependence on Chinese tourism and the intertwined nature of exports and supply chains between the two countries means the coronavirus outbreak has posed downside risks to the country’s growth this year.

Key takeaways from the report

This year’s survey shows a marked change in cash versus credit payment, as Taiwanese companies were more willing to extend credit to B2B customers to increase competitiveness. The coronavirus outbreak on top of the ongoing US-China
trade tensions and the slowdown of China’s economy may explain why.

Whilst trade credit can increase the chances of winning sales and enhancing customer relationships, companies are more exposed to the risk of payment delays or non-payment that lead to an increased pressure on cash flow. Considering your cash flow is important, as the more you use trade credit the less money you have available to produce more products or pay running costs, and this may even influence the cost of, and access to, financing. Indeed, it took 9 days longer than last year for companies to cash in invoices.

With self-insurance as a primary tool used by the majority of respondents In Taiwan,
companies reported an increase in time and costs spent on chasing payment delays involving as much as 40% of the total value of B2B invoices. The pressure and resources spent on credit risk monitoring and debt recovery will be even greater as the impact of
COVID19 pandemic continues to unfold. To mitigate risks effectively, companies should perform regular assessment of their credit management approach to ensure the tools adopted remain effective.

Key survey findings for Taiwan

• Trade credit plays a key role in Taiwanese export B2B transactions

• Extended payment terms support Taiwan’s move towards a more liberal trade
  credit

• Cash payments still more common in B2B trade than Asia average policy

• Significant increase in late payments from B2B customers

• Businesses in Taiwan plan on strengtheniinternal debt collection processes

Interested in getting to know more?

For a complete overview of the payment practices in Taiwan and in the chemicals, ICT/electronics and machines industries in Taiwan, please download the complete report.