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Payment Terms in Indonesia: Balancing Risk and Opportunity Before and During the COVID-19 Pandemic

The Effect of Overdue Invoices in Indonesia

Indonesia is seen as one of the promising countries in Southeast Asia with strong growth over the years. Despite COVID-19 pandemic conditions, the impact has been relatively mild. In 2020, the country’s GDP shrunk to 2.1% as a result COVID-19 pandemic restrictions. The domestic economy mainly from SME became the main driver of the GDP significant growth cited from Kompas.

In Indonesia, businesses are focused on balancing the risk and commercial development opportunities. One of the things that are applied is payment terms. Compared to other Asian countries, Indonesia is considered a country with short average payment terms compared to India and Australia.

High b2b sales in Indonesia cause strong growth for both SME and large enterprises. However, it also creates another problem in overdue payments due to various reasons. Besides, COVID-19 pandemic also increased the payment term longer than usual. In this article, you will discover the overview of payment terms in Indonesia before the pandemic and how they are trying to solve it.

Pre COVID-19 pandemic: The cause & effect of overdue invoice on various industries

Payment terms are varied in Indonesia. In this case, we have collected several findings based on research from top companies about the b2b overdue invoice. From 2018-2019, there is a difference in payment terms applied. In 2018, Atradius research shows payment duration in Indonesia took 53 days, 4 days faster than Asia pacific payment duration.

The long payment period is caused by several reasons, insufficient funds become the main reason followed by the complexity of the payment procedure. An overdue invoice may lead to a worse effect, write-off receivable which can lead to bankruptcy. This problem happens in several domestic industries such as; construction and metal sectors.

Compared to other domestic industries, the construction and metal sector took longer in payment duration, 42 and 38 days based on Atradius. It was caused by the inefficiency of the banking system and disputes over the delivered goods’ quality and services.

In 2019, Indonesia is forecasted to have solid economic conditions in the next two years. Based on BPS, Indonesia’s GDP has grown by 5,02%. Compared to other Southeast Asia countries, Indonesia took over fifth place under Cambodia, Vietnam, Myanmar, and the Philippines based on Asia Development Bank’s Data. This condition increases people’s optimism that Indonesia’s GDP will remain positive in the future.

Most businesses are also shown to loosen up the payment term to support export deals based on Atradius research. On average, payment terms are set on 34 days, 11 days longer than in 2018. It also puts Indonesia back again as one of the Asian countries with shorter payment terms compared to other countries like Japan (average 41 days) and Taiwan (45 days).

Payment term due dates are fluctuating from 2018-2020 due various reasons

However, overdue payments still haunt B2B businesses in Indonesia. Most invoices are paid over the due date. On average, it takes 3 days longer than the actual due date to get paid. In order to solve this problem, businesses start to do several things, for example, take measures to minimize cash outflows to reduce the risk of uncollectible receivables and bad debt. The 2019 Atradius research present that bad debt was reduced to 1,9 compared to last year.

Overdue payments affect several domestic industries starting from manufacturing sectors as the hardest hit, followed by retail in second place and agri-food. Besides, there is also an impact on business based on their size based on Atradius’ research. SME to large enterprises also applies more relaxed payment terms on 32 days as an average. While micro-enterprises also extended more relaxed payment terms to 37 days.

There are differences are found in invoice payment and uncollectible receivables between SMEs and large corporations. Micro enterprises recorded an 8 percent increase for on-time invoice payment and large enterprises overdue payment increase by 9 percent. Large enterprise is also placed at the first position based on the business size that experienced the highest proportion of uncollectible receivables (2,9%), followed by SME (2%) and micro enterprise (1,2%). However, businesses must face COVID-19 pandemic that hits the world which was started from Wuhan and spread across the world.

During COVID-19 pandemic: The rise of trade credit and how it keeps businesses alive

COVID-19 pandemic creates a great disruption to the global economy., including Indonesia. The announcement of the first COVID-19 cases in early March leads to partial lockdown (PSBB) by the government and total lockdown on several countries has impacts on nation economy and export activities.

Many businesses made some mitigation plans to avoid these problems. First, their dependence on bank finance was increased. Businesses also tend to ask the buyer to pay in cash to avoid a liquidity shortage. Last but not least, businesses also try to seek other robust payment guarantees, for example, credit insurance.

COVID-19 pandemic increase trade credit usage among many businesses

Atradius’s research reveals some interesting facts. The payment term was increased from 34 days to 37 days compared to last year. Businesses are more likely to do trade credit as a source of short-term finance. Besides, there are two ways in managing customer credit risk, early payment discount and payment guarantee for credit sales. These methods were proven to ensure business’ cash flow and profitability run smoothly, especially during the pandemic. It can resolve late payment problems that may affect the business.

In 2021, Indonesia was still in the midst of COVID-19 pandemic. There were some high rate cases that led to the partial lockdown. However, businesses were seen to be optimistic in facing the future. Based on the ADB report, Indonesia's economy is forecasted to grow around 3,5% in 2021.

Despite these cases, it only gives a mild impact on Indonesia’s economy. Trade credit offers longer payment terms which leads to a high amount of invoices overdue. In order to solve this problem, businesses need to apply strong credit management. In addition to strong credit management, is able to provide a great solution to solve this problem with various payment solutions for businesses.

How could solve late payment problem for the company is a B2B invoicing & payment platform that has various solutions to help businesses to solve late payment problems. Recently, they have released a new product, Buy Now Pay Later (BNPL) to help businesses to extend payment up to 30 days. Businesses are able to pay later than the due date, instead of paying at a purchase. provides 3 core needs for businesses for invoicing, payment and financing to balance cash flow

Supplier or seller can also gain the BNPL’s benefit with another feature called “Get Paid Faster”. This feature helps the seller or supplier to get instant payment faster before the due date with a smaller fee. The process is pretty simple through an invoice. The seller needs to create an invoice that should be validated by both party buyers and sellers. Next, a validated invoice can get instant payment. also provides various payment options to speed up the payment process between buyers and suppliers, including credit cards, regardless of the supplier provides payment terms or not. Thus, buyers with limited payment options, for example, cash payment are able to choose payment methods based on their needs.

These two solutions can accelerate businesses to recover quickly in this pandemic era. The BNPL solution is able to solve late payment that occurs regularly in any industry, combined with a payment solution that offers businesses the freedom to pay their transaction, including credit card. Therefore, either buyer or supplier is empowered and creates a positive supply chain relationship which may increase Indonesia’s growth in the middle of a pandemic.



Jeremy Limman is the Co-founder & CEO of is part of our Batch 1 GK Plug and Play Fintech program in Indonesia.

At Plug and Play’s GK Plug and Play program, we match large corporations with top-tier startups that are changing the world as we know it. Together, they’ll build the cities of the future. Join our platform today.


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