Debt repayment improves in 3 sectors, says RAM Credit Info


Agriculture, construction and manufacturing sectors recorded improvement in payments to creditors over the last four quarters, says RAM Credit Information Sdn Bhd (RAMCI).

A total of 12 industry indicators were released with the latest inclusion of the education industry, it said in a statement.

The industry indicators revealed that companies involved in agriculture, construction and manufacturing have improved in terms of speed in making payments over the last few quarters.

The trade bureau platform released its 2nd Industry Debts Turned Cash (RAMCI i-DTC) indicators for the period between the third-quarter of 2016 (3Q16) to 2Q17.

RAMCI i-DTC measures the average number of days companies in various industries take to pay their creditors after the invoice date. This was consistent with the broadly positive business prospects for those three sectors, it said.

RAMCI said services-related industries such as information, communication and technology (ICT), financial services and real estate experienced a decline in payment speeds over the same period.

“The delay in payments in the real estate industry, which includes property companies and real estate firms, is due to a slowdown in sales over the last two years, which has contributed to a weak cashflow position,” RAMCI said.

“Delays in payment in ICT and financial services industries, covering generally larger corporations such as banking and financial institutions, telecommunication and IT companies, are due to lengthening of payment processes,” it added.

The indicators showed hospitality, food and beverage (F&B), and the newly added education industries are prompt paymasters.

“The average repayment duration is 30 days for hospitality and F&B sectors, and slightly over 30 days for the education sector,” it added

“For creditors who extend credit to companies in these few industries, it is important to continue to watch for the i-DTC trend and work out an appropriate payment process with debtors to ensure prompt payment,” said RAMCI CEO Dawn Lai.

She said the average i-DTC trend across all industries has seen a gradual increase to 70 days in 2Q17, from 66 days in 1Q17.

“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,” Lai said.

The RAMCI i-DTC data also noted the default payments for business corporations are on a slower pace of increase with an average of a 0.38% rise per month, representing a com- pounded growth rate of 4.56% over the 12-month period, compared to the previous 12-month compounded growth rate of 7.41%, she added.

“This is a positive sign that the economy is stabilising, consistent with the upward revision of GDP (gross domestic product) growth and the broadly positive business sentiment of the latest release of RAM Business Confidence Index,” the CEO said.

Lai said while managing cashflow is important in ensuring sustainability of their businesses, small and medium enterprises need to be more vigilant in their payment collections, taking into consideration the average i-DTC for their debtors and industry.