Businesses have tightened up on the credit terms they offer customers but risk losing them as a result, a survey by trade credit insurer Coface has found.

Coface GM Chris Doubé says companies find themselves in a catch-22 situation, wanting to offer credit terms to stay competitive but worried about the risk of not getting paid.

The third annual Coface survey of corporate credit risk management has found such fears might be justified. Just over half of the managers of 553 Australian companies surveyed reported 54% of payments were overdue by up to 60 days.

Mr Doubé also attributes the shrinking in credit terms to uncertainty about the economic turmoil in Europe and concerns that economic growth in China might stall.

The survey found 38% of companies relied on providing credit terms for at least 75% of their sales, a significant decline from the 2010 survey when 55% were offering credit.

But Mr Doubé says companies risk losing business if they do not offer credit. 

“The ease of international online purchasing poses new risk for Australian companies as they now compete increasingly with global suppliers,” he said.

More Chinese companies are offering credit, and he says it is easier for customers to look for better terms and shop internationally.

Around 5-10% of Australian companies use trade credit insurance, compared with 40% in Europe, and Mr Doubé says if firms want to remain competitive they have to offer more attractive payment terms.

He says they can manage their risk with insurance.

“It’s obvious that Australian businesses are more risk-averse than their international counterparts, partly due to the lack of credit management strategies in place,” he said.

He says one of the surprising responses to the survey was that 41% of businesses ranked increases in salaries and wages as their highest concern, ahead of tighter monetary policy and the strengthening dollar.

The survey across a range of industries and company sizes was conducted in late October.