By Elizabeth Wilmot

SMALL and medium-sized enterprises (SMEs) are having to wait longer to get paid - and it's not just due to the downturn, said business information bureau DP Information Group.

Waiting times have been steadily increasing over recent years, indicating that firms are not being vigilant enough in chasing up debts.

DP Information examined fourth-quarter results in 2006, 2007 and last year, looking at more than two million payment records of over 80,000 SMEs in seven industry sectors.

It found that the waiting period was 43 days in 2006, 45 days in 2007 and 47 days last year.

'SMEs have allowed the time it takes to collect debts to drift over the last two years,' said DP Information managing director Chen Yew Nah.

'An increase in payment days is inevitable during the current downturn. But this data shows the delays have occurred during the previous two boom years, indicating SMEs have not been focusing on enforcing their payment terms.

'Now that we are in a recession, it is critical that SMEs focus on prompt debt repayment.'

Ms Susan Chong, managing director of environmental packaging firm Greenpac, acknowledged the problem.

Her firm waits an average of 60 days for payment but it is trying 'to monitor the accounts receivables closely, sending gentle reminders on a weekly basis'.

Mr Fong Chee Kiang, director of corporate services for oil services firm Franklin Offshore, said: 'We have managed to maintain the average waiting time for customer payments.' The average waiting time is 90 days.

He said the firm has been 'extra vigilant in our collection efforts in the light of the current economic climate'.

Mr Tan Keng Hong, executive manager of environmental products firm Advon Singapore, said: 'We are making more efforts to ensure prompt payment now. But we did receive official requests from a few customers to extend credit terms by 30 days.'

Advon waits on average about '60 days to 75 days' for payment, and takes swift action like stopping further delivery until payment is collected.

Ms Chen of DP Information said the weaker negotiating position of SMEs in dealing with suppliers and clients may be the reason for the increase in waiting times.

'If I'm an SME and I require certain of my raw materials from some very huge multinationals, they are going to dictate very rigid terms,' she said.

Regular customers and those who buy large volumes from SMEs may also be in a stronger negotiating position when it comes to payment terms.

Another problem is the tightening of credit facilities in the downturn.

'With less borrowing, suppliers may say, 'I send you another shipment, but are you going to be able to pay?' Your suppliers may be even tighter,' said Ms Chen.

'A lot of SMEs also suffer from this 'face' issue where (they feel that) asking customers to pay up is a little bit discourteous or may make customers feel upset.'

Increased waiting times were seen in all industry sectors except for wholesale commerce and food and beverage (F&B). Both saw declines in payment times.

'Companies in the wholesale commerce sector are generally export-oriented and depend more on trade financing. Therefore their payment would be faster,' Ms Chen said.

'As for the F&B sector, terms are generally inclined towards cash-on-delivery or shorter credit terms.'

She added that firms can be proactive when it comes to delayed payments: 'This is the time for businesses to put intensive focus on items like accounts receivables and inventory.

'They have to spend more time with their customers, visit them more often, and ask them to pay up.'

Bosses should also consider joining an SME Credit Bureau. DP Info operates one that collates payment information of companies and businesses and gives members access to the data collected.

DP Information's general manager, Ms Ong Siew Kim, said: 'It allows SMEs to understand the risk profile of their customers...and assess their potential counterparties, be it customers, suppliers or partners.'

This article was first published in The Straits Times.