Financial Strain on HoReCa Businesses: Late Payments and Economic Pressures

The hospitality, restaurant, and catering (HoReCa) sector is facing significant financial headwinds, marked by issues such as delayed payments from clients and the impact of rising operational costs. Understanding these challenges is crucial for businesses navigating this complex landscape.

The Impact of Late payments

One of the most pressing concerns within the HoReCa industry is the prevalence of late payments. According to one industry insider, “In this industry (HoReca), the percentage of non -paying crafters is much higher than in others. Those who have but pay only when they are forced. Who has a comparison with other industries, knows what I am writing about.” This situation creates a domino effect, hindering cash flow and potentially impacting the ability of businesses to meet their own financial obligations.

Late payments can disrupt budgeting, investment, and overall financial stability. Businesses must proactively manage accounts receivable through robust invoicing practices, clear payment terms, and consistent follow-up.

Economic Pressures: Costs and Affordability

Beyond payment issues, HoReCa businesses are grappling with increased operational costs due to rising taxes, energy prices and national insurance contributions. This economic strain is impacting affordability and affecting overall profitability. An industry expert noted the impact of these factors: “With such ZUS, taxes, energy prices, the company can only generate debts, because who can afford a trip, hotel stay, or dinner in a restaurant!? More on sklave.”

To address the cost challenge, businesses can explore options such as renegotiating supplier contracts, implementing energy-efficient practices, and optimizing staffing models, and exploring government support programs.

navigating Future Challenges

The HoReCa sector’s ability to adapt to economic pressures and address payment-related issues will be critical to its sustainability. By understanding the root causes of these challenges and implementing practical strategies,businesses can navigate the current landscape and position themselves for long-term success.

Navigating Poland’s Debt Crisis: An Interview wiht Financial Expert

In light of recent reports about rising debts among Polish companies, especially in the HoReCa sector, Archyde News sat down with Dr. Agnieszka Nowak, a leading economist and financial consultant at Nowak & Partners, to gain insights and actionable advice for businesses facing these challenges.

Archyde: Dr. Nowak, thank you for joining us. The reports indicate a concerning rise in debt across Polish companies.From your viewpoint, what are the primary factors contributing to this situation?

Dr.Nowak: Thank you for having me. Several factors are at play. Firstly, rising operational costs, including energy prices and labor costs, are putting meaningful pressure on businesses. Secondly, changing consumer behaviors and seasonal fluctuations, especially impacting the HoReCa sector, are leading to revenue instability. and perhaps most critically, is the issue of late payments, which creates a domino effect, disrupting cash flow and hindering financial planning.

Archyde: Regional disparities seem significant, with Mazowieckie province bearing a disproportionate share of the debt. Does this reflect underlying regional economic imbalances?

Dr. Nowak: Absolutely. The concentration of debt in regions like Mazowieckie,while expected due to its economic activity,underscores the uneven economic growth across Poland. It highlights the need for targeted support and investment in less developed regions to foster more balanced advancement and reduce financial vulnerability.

Archyde: The HoReCa industry appears particularly vulnerable, especially concerning payment reliability. What specific challenges does this sector face?

Dr. Nowak: The HoReCa sector operates on relatively thin margins and is highly susceptible to economic downturns and shifting consumer preferences. The high incidence of late payments from clients further exacerbates the situation. Many smaller businesses lack the resources to effectively manage accounts receivable and enforce payment terms, leading to liquidity problems and increased debt. Furthermore, external factors like increased taxes and national insurance contributions has only made things worse.

Archyde: What actionable advice would you give to Polish companies, especially those in the HoReCa sector, struggling with rising debts?

Dr. Nowak: Firstly, implement robust credit control measures. This includes setting clear payment terms, conducting thorough credit checks on clients, and diligently following up on overdue invoices. Secondly, diversify revenue streams to reduce reliance on a single income source. Explore new markets, offer complementary services, or develop innovative products. Thirdly, and perhaps most importantly, explore debt restructuring options. Engage with creditors to negotiate more manageable payment plans or explore government support programs aimed at alleviating debt burdens.

Archyde: We’ve seen reports that even reliable companies are showing signs of deteriorating payment reliability. Is this a sign of a broader economic slowdown?

Dr. Nowak: It’s certainly a worrying trend.A widespread deterioration in payment reliability suggests increasing financial stress across various sectors, possibly foreshadowing a broader economic slowdown. It could indicate a tightening of credit conditions, reduced consumer spending, or other macroeconomic pressures that require careful monitoring.

Archyde: What role can government policy play in mitigating this debt crisis?

Dr. Nowak: The government can play a crucial role by implementing policies that support business growth, such as tax incentives, streamlined regulations, and access to affordable credit.Also, providing financial literacy programs and business advisory services can empower companies to manage their finances more effectively. Targeted support for struggling sectors, like HoReCa, could also help prevent widespread bankruptcies and job losses.

Archyde: Dr. Nowak, what’s one question about Poland’s economic health and the debt crisis facing Polish companies that you wish more people were asking?

Dr. Nowak: that’s a thought-provoking question. I wish more people were asking: How can we foster a culture of prompt payment and ethical business practices to prevent the domino effect of late payments from crippling our businesses and undermining our economy? It truly is everyone’s responsibility.

Archyde: Dr. Nowak, thank you for your valuable insights.

Dr. Nowak: Thank you for having me.