Late bill payments in Q1 rise to 38%

[SINGAPORE] Delayed bill payments are on the rise again, with companies in the construction sector emerging as the worst paymasters once more.

Across the sectors, 37.88 per cent of payments were late in the first quarter, up from 32.84 per cent in Q4 last year.

In the construction sector, late payments made up 47.66 per cent, up from 42.01 per cent in Q4.

The Singapore Commercial Credit Bureau (SCCB), which draws its data from monitoring more than 1.5 million payment transactions, yesterday said that the deteriorating cashflow situation was a sharp contrast to the preceding quarter, which registered a three-year low in slow payments.

The SCCB's report almost mirrored the one in April by DP SME Commercial Credit Bureau, which also reported that companies had taken a longer time to pay their bills in Q1, and that construction companies were facing the most difficulties.

The weaker showing comes amid slower economic growth here. The Ministry of Trade and Industry noted that Singapore's economic growth slowed from 6.9 per cent in Q4 2013 to 2.3 per cent in Q1 2014 on a quarter-on-quarter (q-o-q), seasonally adjusted, annualised basis.

Just as late payments went up in number, the overall number of prompt payments q-o-q came down - from 57.73 per cent to 51.92 per cent, the SCCB said.

This is the first decline since Q2 2013, when the proportion of prompt payments dipped below the 50 per cent mark to 46.77 per cent.

Prompt payments are defined as a situation in which 90 per cent of bills are paid within 30 days; payments are considered slow when more than half the bills are paid more than 30 days late.

As their cash flow deteriorates, more companies are offering partial payments. These went up marginally to 10.2 per cent from 9.43 per cent in Q4.

Partial payments have been on a steady rise, reversing a downward trend a year ago; in Q1 2013, partial payments made up a mere 6.12 per cent.

Sectorally, an increase in slow payments was experienced in four out of five industries in Q1 this year - a vastly different picture from the preceding quarter, when only one in five industries recorded growth in slow payments.

DBS economist Irwin Seah said that attention should be paid to the weakness in the construction sector; it is not a big part of the economy but its weakness nevertheless reflects risks down the road. "It does suggest companies may be facing liquidity tightness. There's downsizing to their revenue inflows and cost is eroding their profit margins."

Property transactions have fallen, and with developers unable to sell their projects, they become unable to pay contractors, who in turn delay settling their bills with others in the supply chain, he said.

"We need to be watchful of the impact. It's all connected."

He also noted that domestic debt is rising rapidly and may soon reach the historical loan-to-deposit ratio peak of 117 during the 1997/8 Asian financial crisis. Based on the latest official data, the ratio is 108, up from 100 in June last year, he said.

OCBC economist Selena Ling said that slower payments are to be expected amid a slower pipeline of construction projects awarded (-10.8 per cent q-o-q in the first quarter of 2014). In particular, private-sector construction activity has moderated along with a pullback in market sentiment; transaction volumes have eased and private home sales have fallen.

She said: "In addition, there are also the supply- side constraints in terms of the foreign manpower crunch, and the government recently announced its decision to defer $2 billion of public infrastructure projects."

However, she cautioned against reading too much into one quarter of deterioration. "There is no need to over-react at this juncture, but just be mindful to watch for further material deterioration that stretches beyond one to two quarters and/or if the percentage of slow payments overtakes that of prompt payments."