The hidden risk in B2B sales: Why payment terms could be costing you

Offering standard B2B payment terms—such as 30, 60, or 90 days—is often essential for securing and maintaining client relationships. However, these terms shift financial risk from the buyer to the seller. When a customer doesn’t pay, your business bears the cost.

According to the Atradius Payment Practices Barometer 2025, more than 50% of B2B invoices in Australia are now overdue, and roughly 10% of total invoice value is written off as bad debt. In New Zealand, exporters face similar pressures. According to the NZEC Annual Overview 2023–2024, the government underwrote NZD 164 million in trade credit support for 75 exporters, helping them trade with greater confidence.

Trade credit insurance offers a strategic solution—transferring the risk of customer default or insolvency to an insurer, and protecting cash flow.

1. Offering payment terms: value and risk

Payment terms help secure deals, boost average order size and improve client relationships. However, they also increase exposure to late payments or defaults.

With over half of invoices overdue and an average DSO of 42 days, companies find their cash tied up during extended payment windows—impacting operations, limiting agility, and increasing financing costs.

How trade credit insurance helps

Trade credit insurance transfers this risk to a specialised insurer. If a buyer defaults due to insolvency or non-payment, businesses can recover 80–95% of the outstanding amount, preserving cash flow and reducing exposure.

2. The downside of extended terms

While extended payment terms can strengthen customer relationships and support sales, they also expose businesses to heightened financial risk. The longer the terms, the greater the likelihood of delayed payments, placing pressure on working capital, straining cash flow, and limiting the ability to invest, pay suppliers, or cover day-to-day expenses. These challenges become more pronounced in uncertain economic environments or in sectors with slim margins and lengthy project timelines. Without proactive credit risk management, what begins as a commercial incentive can quickly become a liability—undermining stability and growth.

How trade credit insurance helps

Trade credit insurance provides a financial safeguard. By insuring receivables, businesses can maintain reliable cash flow—even when customers default—enabling confident financial planning and sustained operational resilience.

3. Common mistakes in credit management

Many businesses exacerbate risk by:

• Offering credit to unverified or high-risk clients
• Lacking formal credit policies or escalation processes
• Failing to conduct regular credit reviews
• Managing collections reactively

How trade credit insurance helps

Insurers like Atradius provide risk intelligence, early payment alerts, and portfolio oversight tools. These support proactive credit management, enabling businesses to adjust terms or limits before defaults occur.

4. Solutions: internal controls + insurance

Strong credit policies are essential—they should include:

• Customer financial due diligence
• Clear terms and contractual protections
• Defined escalation procedures for past-due invoices

However, internal control cannot entirely eliminate risk. Macro events, industry downturns, or sudden customer insolvency can still disrupt receivables.

How trade credit insurance helps

Trade credit insurance complements your policies with a financial safety net. If an unforeseen insolvency occurs, the insurance payout mitigates losses that internal processes miss.

5. How trade credit insurance protects receivables

Trade credit insurance delivers more than debt recovery—it supports a broader financial strategy:

• Protection against customer insolvency, protracted default, and political risk in cross-border trade
• Access to collections services, frequently included with the policy
• Improved bank financing, as insured receivables carry lower risk and attract more favourable terms

Why Atradius?

Atradius combines global reach with local expertise. Its in‑house underwriting, risk analysis, and collection network—spanning over 50 countries—ensure businesses benefit from both robust protection and market-specific insight.

Summary

While offering payment terms is standard practice in B2B trade, the associated credit risk is real—and costly. Late payments and customer defaults have reached alarmingly high levels in Australia and New Zealand. Trade credit insurance is not a discretionary add-on—it’s an essential component of a resilient credit strategy.

Atradius enables businesses to offer terms with confidence, protect liquidity, and pursue growth—without compromising stability.