Four years ago construction firms were among the slowest payers in Singapore taking an average of 55 days to pay a debt. Today they are among the most improved payers in Singapore taking just 32 days to settle a debt.
According to the Q4 2013 Trade Payment Data released by the DP SME Commercial Credit Bureau (the Bureau), the time construction firms take to settle their debts improved by 12 days compared to last quarter.
The findings are based on payments made by more than 120,000 corporations and SMEs in Singapore each quarter.
Construction companies are now the second fastest payers in Singapore. The fastest payers, chemical companies, have historically had payment cycles twice as fast as any other industry and currently take just 16 days to pay a debt.
Ong Siew Kim, Senior General Manager of DP Information Group (DP Info) said better payment behaviour by construction companies was a sign that the industry had enjoyed a strong period of growth.
"The construction industry has been buoyed by numerous government projects, which has pumped cash into the bank accounts of many firms, leading to increasingly fast debt repayments.
"However, with an expected slowdown in public projects, payment speeds could begin to slow again."
"Companies that do business with construction firms need to be wary of the impact of a slowdown and the chances that some companies could get into trouble. The best way to protect themselves from bad debt is to join a credit bureau where payment data is shared among members," Ong said.
Days Turned Cash
The Days Turned Cash National Average (DTC) - a tool for measuring the number of days a company takes to pay its creditor once the debt is due – remained unchanged at 39 days in Q4 2013.
This is the third quarter where the DTC has remained unchanged at 39. A DTC of below 40 indicates that payment speeds within the economy are relatively fast, leading to better cashflow for companies.
Healthcare/medical companies saw the largest blowout in payment times, with debt payments slowing by 14 days. Companies within the sector acknowledge the slow-down, but feel it reflects the current trading conditions in the industry, where there is strengthening demand on new sales and less focus paid to payment speed.
The heathcare/medical sector has been gaining positive performance over the last few years. Domestically, the silver population has increased demand for healthcare and health-related services and products. Increasing affluence around Asia has also fueled the demand for healthcare and equipment suppliers.
The manufacturing sector experienced the second largest deterioration in payment speeds with a nine day slowdown. Companies in the industry explained that if work is being done on a contract basis and the main contractor is slow in payment, then it affects sub-contractors further down the payment chain.