Delinquent Singaporeans? Not anymore as more businesses pay bills on time

Guess which sector reported the biggest improvement when it came to settling the bill?

As the local economy contends with the Eurozone sovereign- debt crisis and continued restrained growth prospects in the US, recovery remains sluggish and is likely to be muted for the rest of the year. However, payment performance of local firms showed positive signs of change in the first quarter of 2012 as slow payments bottomed out to its lowest level in 12 months.

According to the Singapore Commercial Credit Bureau's latest analysis, overall slow payments dipped by 6.2 percentage points to 41.9% compared to the previous month. A year-on-year comparison further revealed that slow payments contracted by 0.6 percentage points to a 12-month low, after sequential increases month-on-month.

Moving in the opposite direction, overall payment promptness came in modestly higher after a poor showing in the previous quarter, rebounding 5.1 percentage points to 44.6%. However, year-on-year payment promptness was less bullish, up by a mere 0.36 percentage points, pointing towards moderated growth and prevailing macroeconomic downside risks in the months to come

A sectoral breakdown of slow payments showed marked improvements across most industry verticals, with the services sector registering the largest dip in slow payments. Buoyed by healthy growth in the food, accommodation and tourism-related services, overall slow payment in the services sector saw a sharp decline by 8.3 percentage points to 41.3%. The drop in slow payments is also attributable to a surge in trading activities in the financial, insurance and business services sectors.

Meanwhile, payment delays in the construction sector fell by 7.9 percentage points, registering 50.4% due to an increase in construction activities in residential and institutional building segments. The manufacturing sector also took a healthy upturn, fuelled by increased production across all clusters, notably electronics and precision engineering. Slow payment for the manufacturing sector declined by 5.5 percentage points to a 12-month low of 44.5%.

Despite slowing global trade flows and weaker external demand, the wholesale trade sector has maintained the lowest payment delays, down by 7.8 percentage points from the preceding quarter, to 36.4%.

After posting a strong rebound in the last quarter, the retail trade sector saw negative changes in payment performance, largely due to the continued deterioration of domestic economic activity. Slow payments rose slightly to 49.1%, up by 2.9 percentage-points from the preceding quarter.

However, the improved payment performance in the first quarter is hardly indicative of a future upward trend as local payment performance has been volatile and unpredictable over the past twelve months.

Commenting on the state of payment behaviour of local companies, Ms. Audrey Chia, D&B Singapore Deputy Chief Executive Officer said: “While the fall in payment delays is no doubt encouraging, firms have to be mindful of the continued need for due diligence before extending credit terms to their business partners. At a time of rising business costs, the likelihood of payment delinquency will also be higher.”

Earlier this year, SCCB launched the Payment Assessment Report to help Singapore businesses safeguard themselves from risks of payment delinquency or non-payments. Businesses are now able to retrieve information about a company’s payment behaviour via online access. A key feature of the report is the SCCB proprietary payment index, a rating indicating the level of payment promptness of the subject company. With this information on hand, local companies will be in a better position to evaluate low exposure financial decisions and credit applications.