Why do firms pay late, intentionally?
The idea of delayed payments is to balance the cash flow, so that there are enough inflows to match outflows; and that the business finance is not overly strained. As a result, cash rich businesses tends to exploit what is accepted as a ‘common practice’ by intentionally causing late payments without losing the trust of the people operating the process. Their way of doing is to buy on credit and delay the payment beyond credit period as much as possible. To them, lengthening prepayment period is good news; but it is converse to collector as it meant erosion of transaction, precautionary and speculative motives of holding cash.
Payment performance of Singapore’s businesses continued a downward trend as delayed payments rose for the second consecutive quarter in the July-September period, with retail sector registering the highest spike of delayed payments, reported from the Singapore Commercial Credit Bureau (SCCB) in data released Tuesday, October 2nd.
Delayed payments rose by 1.76 percentage point (ppt) from 37.18% in Q2 to 38.94% in Q3 and contributed to a third of total payment transactions. On a quarterly basis, Year-on-year delayed payments slightly improved, slipping by 1.81ppt to 38.94 % in Q3.
Prompt payments dipped by 1.24ppt quarter on quarter from 49.55% in Q2 to 48.31% in Q3 and accounted to under half of the payment transactions. Year-on-year prompt payments inched up marginally by 0.88ppt to 48.31% in Q3.
Partial payment rose by 0.92ppt to 12.74% in Q3.
Statistics across Singapore’s sectors
Where delayed payments are concerned, retail sector has the highest increase of 14.27ppt; from 29.84% in Q2 to 44.11% in Q3. From a year-on-year perspective, delayed payments across all other sectors – construction, manufacturing, services and wholesale have fallen.
Construction, the guiltiest sector, sustained improvement as delayed payments merely decreased by 0.05ppt to 47.28%. The slight improvement was due to an increase in public residential and non-residential projects.
Manufacturing sector saw positive improvements in delayed payments with a drop of 1.18ppt to 37.82% in Q3. This was due to decrease in delayed payments by manufacturers of apparels and textiles, petroleum-coal products and electronic components.
Services sector registered the second lowest proportion of delayed payments, slipping 0.84ppt to 36.70%. The business services sub-sector have the highest drop of 3.70 ppt to 39.42%. Engineering and health services sub-sector also saw a slip of 2.49ppt and 1.07ppt to 37.35% and 33.99%, respectively.
Meanwhile, the wholesale trade sector recorded decrease in delayed payments by 1.65ppt to 35.29% due to decline in delayed payments within the wholesale trade of both durable and non-durable goods.
Reasons for delayed payments
“The spike in slow payments within the retail sector is the largest which we have seen since Q2 2012,” D&B Singapore CEO Audrey Chia said. “This was largely due to weaker sales in the previous quarter resulting from muted consumer sentiments within key sub-sectors such as food and beverage and automobiles. However, the overall payment performance has not deteriorated significantly as slight improvements were seen across majority of the sectors.” she added.
So, which sector will be the most improved bill payer in the next quarter?
RAMCHANDANI, N. (2018). Payment delays by Singapore firms up for second straight quarter in Q3. The Straits Times [Accessed 17 Oct. 2018].