Jun 04, 2014

    Late bill payments in Q1 rise to 38%

    DELAYED bill payments are on the rise again, with companies in the construction sector emerging as the worst paymasters once more.

    Across sectors, 37.88 per cent of payments were late in the first quarter, up from 32.84 per cent in Q4 last year.

    In the construction sector, late payments made up 47.66 per cent in Q1, up from 42.01 per cent in Q4 last year.

    The Singapore Commercial Credit Bureau (SCCB), which draws its data from monitoring more than 1.5 million payment transactions, said on Monday that the deteriorating cashflow situation was a sharp contrast to the preceding quarter, which registered a three-year low in slow payments.

    The SCCB's report almost mirrored the one in April by DP SME Commercial Credit Bureau, which also reported that companies had taken a longer time to pay their bills in Q1, and that construction companies were facing the most difficulties.

    The weaker showing comes amid slower economic growth in Singapore.

    The Ministry of Trade and Industry said that Singapore's economic growth slowed from 6.9 per cent in Q4 last year to 2.3 per cent in Q1 this year on a quarter-on-quarter (q-o-q), seasonally adjusted, annualised basis.

    Just as late payments went up in number, the overall number of prompt payments q-o-q came down - from 57.73 per cent to 51.92 per cent, the SCCB said.

    This is the first decline since Q2 last year, when the proportion of prompt payments dipped below 50 per cent to 46.77 per cent.

    Prompt payments are defined as a situation in which 90 per cent of bills are paid within 30 days; payments are considered slow when more than half the bills are paid more than 30 days late.

    DBS economist Irwin Seah said that attention should be paid to the weakness in the construction sector; it is not a big part of the economy, but its weakness nevertheless reflects risks down the road.

    "It does suggest companies may be facing liquidity tightness. There's downsizing to their revenue inflows and cost is eroding their profit margins."

    Property transactions have fallen, and with developers unable to sell their projects, they become unable to pay contractors, who in turn delay settling their bills with others in the supply chain, he said.

    "We need to be watchful of the impact. It's all connected."

    He also said that domestic debt is rising rapidly and may soon reach the historical loan-to-deposit ratio peak of 117 during the 1997-98 Asian financial crisis.

    Based on the latest official data, the ratio is 108, up from 100 in June last year, he said.

    OCBC economist Selena Ling cautioned against reading too much into one quarter of deterioration. "There is no need to over-react at this juncture, but just be mindful to watch for further material deterioration that stretches beyond one to two quarters and/or if the percentage of slow payments overtakes that of prompt payments."