Payment behavior in Estonia unchanged for last four years - study

Photo: Sille Annuk / Postimees

The payment behavior of Estonian businesses and consumers has not changed substantially in the last four years, it appears from a fresh survey by the credit management company Intrum Justitia.

Businesses delay settling bills by 14 days, public sector institutions by 10 days and consumers by seven days on the average. The late payment period of companies is one day shorter than a year ago.

"One question asked of businesses in the survey was, in which order they settle bills in case of liquidity problems. In most European countries entrepreneurs first pay taxes to the state and then bills of most important suppliers," managing director of Intrum Justitia's Estonian operation Ivar Tammemae said.

"In Estonia major suppliers get paid first, then taxes are paid, and obligations to banks come third. This represents a substantial change in Estonian businesses' behavior - as lately as 2009 the bank was the first that could count on getting money from a company experiencing liquidity problems," Tammemae said.

If in Europe businesses pay up within 49 days of being billed on the average, in Estonia the period is 34 days. Estonian consumers stand out by settling bills within 17 days.

The payment pattern of Estonian consumers resembles that of their Finnish peers who pay their bills in 15 days on the average. In Scandinavian countries the period is 22-24 days while in South European countries consumers may take as long as 57-74 days to settle bills.

The public sector payment pattern of the northern region clearly differs from that of Central and South Europe. Finnish and Estonian public sector institutions pay bills within an average of 24 and 25 days, respectively, the study showed. In other Nordic countries the payment period is 33-35 days. By comparison, public sector institutions of Central and South European countries take 85-170 days to settle their bills.

At the same time the share of bills overdue for more than 90 days is twice as big in Estonia as in Nordic countries, at respectively 14 and 7 percent.

The level of bad debt in Europe has risen from 2.8 percent to 3 percent over the past year. In Estonia the share of receivables that are unlikely to be settled corresponds to the European average compared to 9.9 percent in Greece and Croatia. In Latvia the corresponding indicator is 5 percent. The percentage of receivables unlikely to be collected grew the most in Greece and Latvia and considerably also in Poland and Ireland.

The biggest increases in payment risks compared to the previous year were observed in Greece, Cyprus, Hungary and Latvia, and to a lesser extent in Lithuania, Italy and Ireland. Payment risks have decreased in Nordic countries, Austria and Germany.