Overall payment speed declined in second and third quarter of 2018

KUALA LUMPUR: The overall payment speed declined in second and third quarter 2018, compared with the fourth and first quarter, said RAM Credit Information Sdn Bhd (RAMCI).

According to its Industry Debts Turned Cash (RAMCI i-DTC), the decrease was due to the festive season in Q2, coupled with the 14th General Elections and long holidays in the same period.

Data also showed service-related companies in the education, hospitality, food and beverage industries, which used to make payments promptly in 2017, were taking more days to pay off their creditors, almost doubling the iDTC trend reported in 2017.

“Whilethemajorityofcompanies still grant credit terms in the range of 30 days, the construction, retail and wholesale industries provide 10 per cent to 15 per cent of their customers with longer credit terms of 60 to 90 days.

“This is a norm for these two industries to provide longer payment terms for their customers,” RAMCI said in a statement.

RAMCI chief executive officer Dawn Lai said, however, most of the industries failed to pay their suppliers within the 30-day term but stretched the payment for another 45 days on top of the credit terms given.

“In terms of trade defaults, RAMCI’s i-DTC did not observe any significant deterioration trend from the trade payment defaults over the last 12 months among larger firms, however, there was a higher number of trade defaults from smaller businesses (sole proprietorships/ partnerships),” Lai said.

RAMCI’s i-DTC measured the average number of days companies in various industries took to pay their creditors after the invoice date.

It is based on more than 500,000 payment records on business corporations and small and medium enterprises across a total of 12 industries’ indicators. — Bernama