Businesses in Singapore taking more time to settle their debts

By SMBWorld Asia Editors | Jan 13, 2012

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While the time Singapore companies take to pay their debts has improved slightly, 18% of all monies owed remains unpaid 90 days after the debt is due.

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 40 days for Q4 2011.  This compares to 41 days in Q3 2011.

However compared to Q4 2010, companies are taking four more days on average to settle their debts.

The DTC National Average was developed by the DP SME Commercial Credit Bureau (the Bureau), and is based on payments made by more than 100,000 companies and SMEs in Singapore each quarter.

Credit-related companies recorded the worst deterioration in repayment speed with the number of days taken to settle their accounts increasing from 20 days in Q4 2010 to 35 days in Q4 2011.

Communications and logistics companies are also taking substantially longer to pay, from 31 days in Q4 2010 to 43 days in Q4 2011.

The electronics sector recorded the biggest improvement in payment times, from 49 days in Q4 2010 to 37 days in Q4 2011.

The shipping and marine sector took nine days shorter to repay their debt compared to the previous quarter. However, they are still the slowest payers at 60 days, which is 50 percent above the DTC National Average of 40 days.

Even though chemical companies took longer in Q4 to repay debts (13 days in Q4 2010 compared to 15 days in Q4 2011), they are still the fastest payers of any industry sector.

Ong Siew Kim, Senior General Manager of DP Information Group said companies - especially SMEs – that want to increase their cashflow, should take a closer look at improving their account receivables.

“Three months is a long time to not be paid.  While the debt is outstanding, the company that owes the money has the use of the funds.  This can hinder smaller companies who usually operate on tight budgets and have limited reserves.“

Changes in payment behaviour, such as suddenly becoming slow to pay debts, are often a sign that a company is experiencing financial difficulties.  SMEs should consider joining a credit bureau as a means of getting an early warning of potential problems,” Ong said.