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Singapore manufacturers show most improvement in bill payment: study

THE manufacturing sector has shown the most improvement when it comes to payment behaviour in the last three years.  The sector has slashed 14 days off the average time a company takes to pay a debt – from 42 days in Q2 2016 to 28 days in Q2 2018. 

In contrast, the average time taken for a retail company to pay up has increased by more than 157 per cent, from 14 days in Q2 2016 to 36 days in Q2 2018.

This was according to DP Information Group’s analysis of the quarterly “Days Turned Cash” national average - a measure of how quickly SMEs (small and medium enterprises) pay their debts - based on the payment data of more than 120,000 companies.

James Gothard, general manager of credit services & strategy, South-east Asia, Experian, the parent firm of DP info, said that Singapore’s manufacturing sector is experiencing a revival, and its strong performance is fuelling quicker settlement of debts.

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“Singapore is enjoying a manufacturing renaissance with double-digit growth year-on-year. Led by the biomedical and electronics sectors, manufacturing companies are enjoying the type of growth other sectors can only be envious of.”

He added that sustained growth has led to better cash flow and creditworthiness among manufacturers.  With more cash in the bank they are settling their debts faster, which also bodes well for their suppliers.

In contrast, the fate of retail companies has been different in the last three years, as the sector struggles with rising manpower and rental costs, combined with the growth of online shopping. These factors have led to thinning margins and cash flow pressures, which explains why retailers are increasingly slower in paying back the money they owe, he said.

“There are signs of a pickup in the retail sector with overall retail sales edging up 2.2 per cent in May, and the government’s recently announced Industry Transformation Map promises to drive the sector towards the cutting-edge of digital commerce.

“While they may be slower in payment, retail companies have the lowest level of severely delinquent debt, with just six per cent of money owed still unpaid after 90 days.  So if an SME is worried about a retail company that owes them money, they should join an SME credit bureau.  That way they will get an early warning if the debtor company’s payment behaviour deteriorates,” Mr Gothard added.

Two other sectors have also shown improvements in their payment behaviour. They are the information and communications sector, which is now paying their debts 13 days faster than three years ago, and the services sector which is paying their debts 12 days faster.