Wednesday, Sep 05, 2012
The Business Times
By Siow Li Sen
SINGAPORE – More firms are having cash-flow problems – with more than half the payments being delayed. The situation will only get worse as the slowdown begins to bite.
Only seven bills out of 20 were paid on time, with prompt payment hitting a record low of 37.3 per cent in the second quarter, said the Singapore Commercial Credit Bureau (SCCB) yesterday.
The previous low of 39 per cent was recorded in Q2 2011.
This is a sharp reversal from Q1 when nine bills out of 20 were settled promptly.Local firms’ payment performance has taken a turn for the worse after hitting an all-time low in payment delinquency last quarter, said SCCB.
Payment delays have hit a record high of 53.8 per cent, a sharp 11.9 percentage-point increase from the previous quarter, it said.
“The positive correlation between weak market performance and poor payment behaviour is clear to us by now,” said Audrey Chia, D&B Singapore’s chief executive.
SCCB operates under D&B Singapore.
“But more worryingly, we also see a noticeable trend of firms making fewer partial payments to their suppliers last quarter as company profits are being undermined by poorer cash flows,” said Ms Chia.
Fewer firms are making partial payments compared with the preceding three quarters. Partial payments have fallen by 4.6 percentage points to 8.9 per cent. This marks the second lowest partial payments since a year ago in Q2 2011 when partial payments made up only 7.9 per cent of total commercial transactions.
As global economic woes persist, companies are bracing themselves for more bad news.
On Monday, reports said purchasing managers’ index (PMI) for China and other Asian exporters slid last month as new export orders from the eurozone declined.
The HSBC-Markit gauge for China showed factory activity shrinking at its fastest pace in more than three years, mirroring the official PMI’s slide into contraction zone. Taiwan and South Korea also saw contraction, while Singapore’s barometer of industrial activity slid further into the sub-50 contraction zone to a reading of 49.1 in August, down from July’s 49.8.
The bureau looked at 200,000 payments in the quarter under review, said Eugene Tan, SCCB manager, product development & marketing.
Prompt payment is classified as one in which at least 90 per cent of total bills are paid within the agreed payment terms – usually 30 days, but could stretch to 90 days. Slow payment is when more than 50 per cent of total bills are paid later than the agreed credit terms.
On a sectoral basis, in Q2, the retail sector fared the worst, living up to its reputation as being the worst paymaster with the highest proportion of slow payments at 62.4 per cent – a whopping 13.3 percentage point increase from Q1, 2012.
Weaker consumer spending and slackening external demand have hit hard on the retail sector, said SCCB.
The wholesale sector, traditionally the best paymaster among the industries, has experienced its worst payment record in the history of SCCB’s payment analysis.
Owing to a deterioration of wholesalers in the chemicals, petroleum and electronics businesses, the sector experienced more than 50 per cent slow payment transactions for the first time. At 50.9 per cent, the sector registered the highest jump in payment delays, up 14.5 percentage points from the preceding quarter.
Wednesday, Sep 05, 2012