Payment woes in the SME market

Based on payment data of over 400,000 payment transactions from firms that employ 200 or less, it has been observed that 41% have not met credit limits during the 4th quarter of 2008. When compared to the 4th quarter of 2007 the year end of 2008 has seen an 8% increase in slow payments on year on year basis.

As a further reflection of the Singapore’s financial woes the number of prompt payments has seen a 12% decrease over the last quarter of 2008 as compared to the previous year. It has been observed that prompt payments have been decreasing at an average rate 4.5% from the 1st to the 3rd quarter of 2008 and can be expected to decrease further during 2009.

In an article in the Straits Times on the 14th of January D&B (Singapore) CEO K.S Yun explained that the decline in prompt payments made by SME’s is not a necessary indicator of banks unwilling to lend but rather a strategy to save funds for a rainy day. In his statement he states: “Companies are showing signs that they are hoarding cash and paying off the more critical invoices”. “The first two quarters of 2009 will see a majority of companies not keeping to credit terms and making slow payments” he said.