Payment speeds improve for agriculture, construction and manufacturing firms

KUALA LUMPUR: Companies in the agriculture, construction and manufacturing have a notably improved trend in terms of speed in making payments to creditors over the last few quarters, consistent with broadly positive business prospects for these three sectors, according to the RAMCI 2nd Industry Debts Turned Cash (RAMCI i-DTC) indicators measured from the last four quarters, Q3 2016 to Q2 2017.

The indicators were released by the Trade Bureau platform of RAM Credit Information Sdn Bhd (RAMCI), one of the leading credit reporting agencies.

RAMCI’s i-DTC measures the average number of days companies in various industries take to pay their creditors after the invoice date. A total of 12 industries’ indicators have been released yesterday, with the latest inclusion of the education industry.

Its indicators revealed that services-related industries such as the information & communication technology (ICT), financial services and real estate sectors experienced a decline in payment speeds over the same period.

For the real estate industry, which includes property companies and real estate firms, it is probably due to a slowdown in sales over the last two years that contributed to the stretch in their cash flow.

As for ICT and financial services industries covering generally larger corporations such as banking and financial institutions, telecommunication and IT companies, it could possibly be due to a lengthening of payment processes.

The hospitality and food and beverage, (F&B) and education industry (new addition) seem to be prompt paymasters with an average of 30 day for hospitality and F&B, and slightly over 30 days for education.

RAM Credit Information Sdn Bhd CEO Dawn Lai said for creditors who extend credit to companies in these few industries it is important to continue watching the i-DTC trend and work out an appropriate payment process with their debtors to ensure prompt payment.

The average i-DTC trend across all industries has seen a slow climb up to 70 days in Q2 2017, from 66 days in Q1 2017. While the majority of companies still grant credit terms in the range of 30 days, the construction, retail and wholesale industries require longer credit terms of 60 days to 120 days.

“The RAMCI i-DTC data also indicated that the defaulted payments for total business corporations are on a slower pace of increase with an average 0.38% increase per month, representing a compounded growth rate of 4.56% over the 12-month period, as compared with previous 12-months compounded growth rate of 7.41%,” Lai said.

This indicates a positive sign that the Malaysian economy condition is stabilising, consistent with the upward revision of GDP growth and the broadly positive business sentiment with the latest release of RAM Business Confidence Index, a quarterly business survey jointly conducted by RAM Holdings and RAMCI on over 3,000 corporate and SMEs.

The RAMCI i-DTC indicators are based on more than 450,000 payment records on business corporations and SMEs measured between Q3 2016 and Q2 2017, and segregated by industry to allow a clearer picture of how fast companies in each industry pay their creditors.