More companies not paying up on time in Q1 2013

PHOTO: More companies not paying up on time in Q1 2013

SINGAPORE - Payment performance has moderated downwards for the first quarter of 2013, following two consecutive quarters of marked improvements.

This was seen within the context of challenging economic conditions and the promise of a decisive
recovery still remaining a low possibility.

While overall payment promptness has held steady above the 50 per cent mark, the downward trend has become more evident and visible in the first quarter.

According to Singapore Commercial Credit Bureau (SCCB)'s latest payment trend analysis, payment promptness has declined marginally by 1.21 percentage points quarter-on-quarter (q-o-q) from 51.59 per cent to 50.38 per cent.

However, the proportion of prompt payments was still better compared to a year ago for the very same quarter. A year-on-year (y-o-y) analysis revealed a substantial 5.82 percentage point increase from 44.56 percentage points to 50.38 percentage points.

Meanwhile, payment delays continued to increase as slow payments rose by 2.51 percentage points q-o-q, from 40.99 percentage points to 43.50 percentage points. This stands in some level of contrast compared to Q4 2012 when payment defaults increased by a mere 0.79 percentage points. Reaching its new peak over the past year, slow payments have increased by 1.58 percentage points from 41.92 percentage points y-o-y.

According to SCCB, partial payments have declined by 1.8 percentage points from 7.92 per cent to 6.12 per cent. This marks the lowest proportion of partial payments made in the history of SCCB's payment analysis.

Compared to Q4 2012, payment performance has declined last quarter with four of five sectors experiencing varying levels of increase in the proportion of slow payments made. With the exception of the retail industry, payment delinquency has risen in the remaining industries.

The sharpest increase in proportion of payment delays was most evident in the wholesale sector. Last quarter, the sector registered a 4.45 percentage-point increase from 35.71 per cent to 40.16 per cent q-o-q. A y-o-y analysis also revealed a 3.76 percentage point increase in payment defaults. The decline is likely a result of modest external-oriented wholesale trade activities in Q1. However, the wholesale sector has nevertheless maintained its reputation as the best paymaster.

After two consecutive quarters of decline, both construction and manufacturing sectors have seen their payment defaults increased for the first time since Q2. Slow payments increased by 1.49 percentage points from 41.19 per cent to 42.68 per cent for the construction sector.

On the other hand, payment defaults in the manufacturing sector have increased by 2.07 percentage points from 42.94 per cent to 45.01 per cent. The construction sector has however performed relatively well year-on-year as slow payments declined sharply by 7.72 percentage points.

Significant expansion and elevated activities are expected within the sector with a strong pipeline of projects being awarded to construction firms in the recent years. On the other hand, y-o-y slow payments have increased for the manufacturing sector as it jumps 0.51 percentage points from the previous year. The weaker showing is indicative of the volatility within the sector, which continues to struggle amid inflation, labour shortages and declining demand.

Payment performance still remains positive for the retail sector as the proportion of slow payments declined by 2.76 percentage points from 54.73 percentage points to 51.97 percentage points. The downward trend in payment defaults within the sector since the third quarter of 2012 is likely attributable to higher sales turnover from the Lunar New Year festive season. The Monetary Authority of Singapore (MAS) reported an increase in consumer spending on the back of buoyant business receipts from consumer durables and electronic gadgets.

Following a marginal 0.29 percentage point increase in slow payments in Q4, the services sector experienced a more pronounced 3.33 percentage point increase in payment defaults from 39.73 percentage points to 43.06 percentage points. According to SCCB, the services sector ranks third in terms of slow payments made, a notch up from Q4 2012.

"Market sentiments over the past quarter have remained relatively upbeat compared to the same quarter about a year ago. However, businesses should be mindful of the challenges which lie ahead as expected growth is likely to be slower than predicted. This is reflected in the slight downturn in payment performance over the past quarter. Last year, overall payment performance of firms was relatively better with three better-performing quarters than the year 2011. It will be interesting to see whether a downward or upward trend will take hold for the rest of 2013." said Ms. Audrey Chia, Dun & Bradstreet (D&B) Singapore's Chief Executive Officer.

"At SCCB, we recognize the need for cross-border due diligence as regional trading activities have increased substantially and will significantly impact the credit management practices and processes here in the long-term." added Ms. Chia.

Earlier in January 2013, SCCB has launched its first ever Malaysia Credit Search service on its online access bureau platform. Against the background of strong economic relations and high levels of trading activities between Singapore and Malaysia, this new service caters specifically to the growing demand in due diligence for Singapore companies doing searches on their Malaysian business partners.