The percentage of severely delinquent debts owed by Singapore companies has dropped dramatically during the last two quarters.
This is the key finding of the Q1 2013 Trade Payment Data released today by the DP SME Commercial Credit Bureau. The findings are based on payments made by more than 120,000 corporations and SMEs in Singapore each quarter.
The percentage of severely delinquent debts - those which are unpaid for more than 90 days - has been growing steady since 2011 to reach a peak during the third quarter of 2012 at 29 per cent. This means that just six months ago, nearly 30 cents of every dollar owed was more than 3 months in arrears.
The Q1 2013 Trade Payment data shows severely delinquent debts have nearly halved, dropping to just 15 per cent.
Ong Siew Kim, Senior General Manager of DP Information Group (DP Info) said the improvement in the level of severely delinquent debt was due to several factors.
"Companies tend to be better payers towards the end of the financial year. We regularly see improvements in the fourth quarter as companies settle debts and square off their books," says Ong. "We have also seen an increase in companies being more active in pursuing debts, either through professional receivables companies or by having their accounts staff chase outstanding amounts."
Ong adds it is also possible that a proportion of the debt has been simply written off when companies just give up chasing and accept the debt has gone bad.
"The best advice for SMEs concerned about bad debts is to share their payment data with other companies through a credit bureau. So if a debt doesn’t get paid, all the credit bureau's members can be alerted to it and can take preventive action," Ong said.
DAYS TURNED CASH
While the payment of long standing debts has improved, the rate of payment of all debts has remained the same as last quarter. The Debts Turned Cash (DTC) National Average - a tool for measuring the number of days a company takes to pay its creditor once the debt is due – has remained steady at 38 days for the last two quarters.
Ong explains that while there was movement in individual industry sectors, the overall trend has changed little.
"The construction, communications/logistics, healthcare/medical and services sectors have both enjoyed speedier payments during the first quarter of the year. However, credit companies and those in the shipping/marine and utilities/fuels sectors have seen the rate they get paid slow down."
"For most of last year, the DTC was above 40 days and it has risen as high as 57 days during periods of uncertainty. Hopefully we will see a sustained period where the DTC remains below 30 days, which spells good news for the cash flow of many companies," Ong notes.