By Francis Chan

Many companies are starting to delay making full payments to suppliers and contractors - a tangible sign that the global financial crisis has hit local businesses.

New data shows that 42 per cent of local companies paid suppliers promptly in the second quarter, markedly down from the 56 per cent in the January to March quarter.

Credit rating agency Dun and Bradstreet (Singapore), or D&B Singapore, used payment data, such as account receivables, from 1,000 companies to compile the figures.

And while information from 1,000 companies was analysed, the consolidated data comprises more than 400,000 payment records from about 50,000 companies here.

D&B classifies prompt payment as when at least 90 per cent of bills are paid within the agreed terms. Slow payment is when more than half of bills are paid later than the agreed terms.

The proportion of companies that were slow in payment increased by 12 per cent to 43 per cent in the April to June quarter.

D&B Singapore chief executive officer (CEO) Yun Kok Siong said: 'Looking at the current economic conditions in the world, it can be expected that this decline...will continue to the end of the third and fourth quarters.'

D&B's data covered all major industries, such as manufacturing, construction, wholesale and services industries, with some sectors performing better.

The most significant drop was in the wholesale industry, which reported a decrease of 17 per cent in prompt payments from a high of 62 per cent last March.

Slow payment numbers for the wholesale industry rose to 40 per cent - up from 25 per cent - by the end of the second quarter.

Construction was the least-affected industry with only a 4 per cent decrease in prompt payments and 5 per cent increase in slow payments.

'This performance should be mainly attributed to the boom in the property market which largely lasted through the last quarter of 2007 to the end of the first quarter of 2008,' said Mr Yun.

He also told The Straits Times that firms were quick to cut prompt payments when gross domestic product fell, but reacted more slowly when GDP rose.

'Companies seem relatively sluggish in making prompt payments over quarters where the GDP has increased. However, upon a decline of GDP, the number of prompt payments declined by 10 per cent,' he said.

'Therefore, it may be expected that slower payment trends may continue to the end of the third quarter regardless of whether Singapore's GDP improves.'

Many economists have told The Straits Times that they have lowered their growth forecast for the country to under 4 per cent for the year.

Besides being closely linked to economic performance, Mr Yun said, payment patterns are inevitably affected by the financial crisis.

'Banks may be more conservative or have more stringent requirements on businesses now,' he said.

'But some companies may also have fears of a cash crunch, so they become more selective in payment: paying off the more important ones, while the less important ones they hold back.'

This article was first published in The Straits Times on September 25, 2008.