- In 2024, the average payment period worldwide was 62 days, +2 days up compared to 2023. In Europe, it was 58 days, also +2 days up compared to 2023.
- Global WCR (Working Capital Requirements) increased by +2 days to 78 days. This is the highest level since the credit crisis (2008).
- If the tariffs announced by Trump are fully implemented, European companies will need €8.5 billion in additional working capital.
Companies face longer payment terms
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Key insights
Increase in payment terms
According to our latest report on payment terms (DSO), companies worldwide had to wait an average of 62 days for payment of their invoices in 2024. That's an increase of +2 days from 2023. In Europe, the average payment term was 58 days, also up +2 days from 2023.
Johan Geeroms, our Director Risk Underwriting Benelux: "DSO is an important financial indicator. It says something about the financial health of companies. Rising DSO in Europe and other regions of the world are mainly a warning signal of deteriorating liquidity. Companies are increasingly struggling to meet their obligations. They also have less room to invest. They are becoming more dependent on banks because they need extra money. But those banks are actually applying the brakes because the DSO is deteriorating."
By paying later and later, companies keep each other in a stranglehold, according to Johan Geeroms. "In fact, you use your customer as a bank. By waiting longer to pay, you borrow money for a while, so to speak. This is how companies put each other in liquidity problems and the risk of non-payment and bankruptcy increases."
11 billion additional credit
Extending payment terms and building high inventories is one form of credit that companies are offering. "From the fourth quarter of 2024 through the first quarter of 2025, European companies effectively extended an additional €11 billion in business credit - almost as much as monthly new credit flows from banks since the beginning of the year," said Maxime Lemerle, Lead Analyst for Insolvency Research at Allianz Trade."
Increase in working capital requirements
In 2024, the global WCR (Working Capital Requirements) increased by +2 days to 78 days. This is the highest level since the 2008 global financial crisis. Western Europe especially stood out with an increase of +4 days, for the third year in a row to 67 days. On the contrary, the US showed a decrease in WCR by -3 days. We foresee companies weakening due to falling demand putting further pressure on sales. European companies are especially vulnerable. They are saddled with much more inventory than U.S. companies. As a result, they face significant credit risk and remain vulnerable due to their rising financing needs.
Due to weak demand, seven sectors contributed most to the increase in WCR in North America, Western Europe and APAC: transportation equipment, chemicals, energy, retail, machine equipment, metals and software/IT services. There were also sectors whose WCR declined, such as paper, B2C services and hospitality in Europe.
New rise in WCR possible
In the current uncertain times, including the erratic plans Trump is launching, there is a high probability that WCR will rise further. "In an unfavorable scenario, WCR will rise significantly further. If tariffs are implemented in the US to the extent announced on 'Liberation Day,' GDP growth would fall by -1pp, which would increase financing costs for the trade balance. In such a scenario, European companies would have to finance an additional €8.5 billion and US companies an additional $15.5 billion. That could rise further if fiscal slippage and supply-driven inflation shocks cause interest rates to rise by +1pp. WCR in Europe would then increase by €14 billion and in the US by $26 billion," said Ana Boata, Head of Macroeconomic Research at Allianz Trade.
Download our research report on payment terms
In the current economic and political climate, companies face longer payment terms and, consequently, an increase in working capital requirements.
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