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Local firms' cashflow improves in Q3

Better economic outlook leads to speedier payments, says credit bureau
Tuesday, November 12, 2013 - 06:00

[SINGAPORE] Cashflow of local firms has taken a turn for the better in the third quarter after two quarters of moderate declines since Q4 2012.

Prompt payments, in particular, have improved marginally after hitting a one-year-low, said the Singapore Commercial Credit Bureau yesterday.

According to the bureau's latest payment analysis, prompt payments edged upwards by 0.73 of a percentage point quarter on quarter (q-o-q) to 47.5 per cent.

The uptick follows two consecutive quarters of moderate decline.

Compared to a year ago, prompt payments are down by 1.8 percentage points from 49.3 per cent.

The better showing comes amid predictions of an improved economic outlook. The government recently raised Singapore's expected growth to between 2.5 and 3.5 per cent this year.

"In line with the gradual recovery of the global economy, the growth outlook for local companies looks set to improve for the rest of the year," said Audrey Chia, D&B Singapore chief executive. "The slight uptick in payment performance last quarter is a reflection of a better performing domestic sector over the past three months."

Operating under D&B Singapore, the bureau tracks more than 1.5 million payment transactions. Where credit terms are generally 30 days, prompt payment is defined as when at least 90 per cent of total bills are paid within the agreed payment terms; slow payment is when more than half the total bills are paid later than the agreed credit terms.

The proportion of partial payments made by local firms continues to increase as more firms are clearing their outstanding debts partially.

Partial payments inched up 0.89-point to 7.98 per cent, the second highest showing over the past 12 months. On a year-to-year (y-o-y) basis, partial payments dipped by 2.52 points from the previous 12-month peak of 10.5 per cent.

A sectoral analysis revealed that payment delays have declined across four of five industries, the bureau said. This stands in sharp contrast to the previous quarter when payment delays increased for all five industries on a q-o-q basis.

But y-o-y, three of five sectors have experienced an increase in slow payments.

Despite emerging as the slowest paymaster among all industries, the retail sector experienced the sharpest decline in payment delays. Slow payments fell by 6.48 points to 50.27 per cent q-o-q.

This is attributed to stronger business receipts in apparel and accessories as well as eating and drinking outlets here, it said.

Payment delays within the sector hit a previous low of 49.1 per cent in Q1 2012.

On the other end of the spectrum, the wholesale sector ranks as the best paymaster as payment defaults fell by 2.46 points to 39.31 per cent. The slightly better showing comes on the back of a steady increase in electronics re-exports. However, the sector remains vulnerable to global headwinds as y-o-y slow payments rose steeply by 8.21 points.

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