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Local firms' payment delays ease in Q3

Thursday, October 2, 2014 - 05:50
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The retail sector emerged as the sector with the second highest proportion of slow payments due to "weaker consumer demand and a decline in tourist arrivals over the past quarter" - PHOTO: SPH

[SINGAPORE] FOR the first time in three consecutive quarters, payments delays by local firms have eased.

While Singapore's manufacturing, services and wholesale industries experienced a marginal increase in slow payments, the construction and retail sectors fared better.

According to the Singapore Commercial Credit Bureau, the proportion of payment delays by local firms inched up only slightly by 0.82 percentage points to 41.92 per cent in Q3 2014 from 41.1 per cent in Q2 2014. This was in contrast to the previous quarter when slow payments rose by slightly over three percentage points.

The decrease in prompt payments over the past three quarters has also plateaued since its first decline in Q1 2014.

Overall payment promptness experienced a marginal decline quarter-on-quarter (q-o-q) as it slid by 1.41 percentage points from 47.38 per cent in Q3 2014 to 45.97 per cent in Q4 2014.

Partial payments - which account for more than 10 per cent of the total payment transactions - continued to climb towards a new peak in two-and-a-half years.

According to the bureau, Q3 witnessed a reversal in the payment behaviour of local firms in Q2 when all five industries - construction, manufacturing, retail, services and wholesale - suffered an increase in slow payments.

Audrey Chia, D&B Singapore's chief executive officer, noted that the signs were encouraging.

"The situation is quite unlike two years ago when the likelihood of slow payments becoming delinquent over time was higher. While our projections remain cautious in light of the low market confidence, we also observe that firms are less likely to defer payments to their creditors as this would ultimately put a dent in their creditworthiness in the long term."

Despite its notoriety as a poor paymaster, payment delays within the construction sector fell for the first time in Q3 after two consecutive quarters of increases since Q1 2014. On a year-on-year basis, however, payment delays edged upwards for the fourth consecutive quarter, by 1.55 percentage points from 46.73 per cent in Q3 last year.

The retail sector emerged as the sector with the second highest proportion of slow payments due to "weaker consumer demand and a decline in tourist arrivals over the past quarter". Food and beverage retailers, furniture and home furnishing stores, and retailers of building materials and garden supplies posted the largest proportion of payment delays.

The services industry registered the third highest proportion of slow payments. Within the sector, health services experienced the highest proportion of payment delays, followed by education services and hotels and accommodation services. Education services sub-sector posted the largest increase in payment delays. Last quarter, the banking sector posted a moderate increase in payment delays.

Payment delays within the manufacturing industry registered the largest increase among the five sectors due to "a sharp contraction in manufacturing output in the general manufacturing and transport engineering clusters''.

Within the wholesale trade of durable and non-durable goods, payment delays also increased, with the latter being the main contributor of the slower payments made last quarter.

D&B Singapore compiles its figures by monitoring more than 1.5 million payment transactions of firms operating through its Singapore Commercial Credit Bureau. Payment data is contributed to the bureau by local firms.

Payment is classified as prompt when at least 90 per cent of total bills are paid within the agreed payment terms, while slow payment is classified as when more than 50 per cent of total bills are paid later than the agreed credit terms.

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