Sharp fall in prompt payment by local companies in Q3 2016

Sharp fall in prompt payment by local companies in Q3 2016

The weaker payment performance in the third quarter is a “clear indication that firms here are feeling the impact of a credit crunch”, says D&B Singapore.

SINGAPORE: Payment performance of local firms “deteriorated strongly” year-on-year in the third quarter of 2016, said the Singapore Commercial Credit Bureau (SCCB) in data released on Monday (Oct 3).

Prompt payments declined to about 42.18 per cent of total payment transactions in the third quarter, compared to a year ago when 51.05 per cent paid their bills on time. Slow payments also rose, accounting for more than two-fifths of payment transactions in the same period.

q3 2016 payment performance

According to D&B Singapore, which compiled the figures, transactions are classified as prompt payments when at least 90 per cent of the total bills are paid within the agreed payment terms. Slow payments are when more than 50 per cent of the total bills are paid later than the agreed credit terms.

On a quarter-on-quarter basis, prompt payments dipped from 45.92 per cent in the second quarter of 2016 to 42.18 per cent. Slow payments went up to 42.18 per cent from 45.92 per cent in the previous quarter.

SLOW PAYMENTS DETERIORATE ACROSS ALL SECTORS

From a sectoral perspective, quarter-on-quarter slow payments deteriorated across the five industries surveyed: Construction, manufacturing, retail, services and wholesale. This is in contrast to last quarter when improvements in slow payments were visible across the board.

Year-on-year payment delays also jumped markedly across the industries.

slow payments

The construction sector registered the highest proportion of slow payments for the third consecutive quarter, with payment delays accounting for more than half of all payment transactions. According to SCCB, quarter-on-quarter payment delays jumped to 50.82 per cent, compared to 46.6 per cent the previous quarter.

The sector also saw the steepest increase in slow payments both quarter-on-quarter and year-on-year, noted SCCB, adding that this was “largely due to a weaker payment performance by special trade contractors”, which saw the “sharpest increase” of 5.85 percentage points to 48.89 per cent, from 43.04 per cent in the second quarter of 2016.

Meanwhile, slow payments in the services sector deteriorated due to “a downturn within the business services segment and a fall in tourist arrivals in recent months”, said SCCB. Quarter-on-quarter payment delays climbed to 48.01 per cent, from 44.14 per cent the previous quarter.

Payment delays by firms offering membership services registered the largest increase of 10.64 percentage points to 44.54 per cent from 33.90 per cent the previous quarter. This was followed by education services which saw a rise in slow payments from 44.25 per cent in the second quarter of 2016 to 52.02 per cent.

“FIRMS FEELING THE IMPACT OF A CREDIT CRUNCH”

D&B Singapore said the weaker payment performance in the third quarter is a “clear indication that firms here are feeling the impact of a credit crunch”.

“The construction sector has, in particular, experienced one of the highest proportions of payment delays in two years since Q3 2014,” said D&B Singapore CEO Audrey Chia. “Managing cashflows has always been a major concern this sector given its complexity, involving multiple suppliers and special trade contractors who undertake specialised work.

“Firms could adopt alternative measures which provide some relief to their cashflow problems as the enforcement of payment terms could potentially pose potential challenges to maintaining business relationships. This may involve performing a highly rigorous evaluation in the form of credit checks on customers as well as a diversification of funding through non-traditional financing institutions as a means to tide through cashflow issues."

Source: CNA/ek

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