COMPANY cash flows may be easing with more small and medium-sized enterprises (SMEs) paying suppliers on time, according to new payment data from Dun & Bradstreet (D&B) Singapore.
Latest figures from the credit rating firm show that 45 per cent of bills owed by SMEs were paid promptly in the second quarter of this year.
D&B defines 'prompt payment' as settling 90 per cent of the value of an invoice within the allowed payment period.
The second-quarter figures are ahead of the 41 per cent reported in the last quarter of 2008, and only slightly down from the pre-crisis level of 53 per cent reached at the beginning of last year.
The number of firms which were late payers also fell from 41 per cent in the fourth quarter of last year, to 38 per cent in the second quarter of this year.
D&B compiled the figures by monitoring more than 1.2 million payment transactions of firms operating here through its SME Credit Bureau.
D&B chief executive Yun Kok Siong said prompt payment declined last year by an average of 4.5 per cent per quarter as a result of the credit crunch.
Better-than-expected manufacturing figures and feedback from firms citing returning orders could be helping to turn the prompt payment tide, he added.
In May, the Purchasing Managers' Index (PMI) - a leading indicator of manufacturing activity - turned positive for the first time in more than nine months. Observers noted that PMI numbers have shown persistent improvement in the months leading up to May.
And while official figures released last Friday showed factory output here contracted 1.6 per cent in May, on a seasonally adjusted month-on-month basis, manufacturing output actually rose 2 per cent from a year earlier in a second month of gains.
Mr Yun said the improving numbers gave firms 'better visibility' of what lay ahead as the economy continued on its path to recovery.
'It's a matter of confidence. During a crisis, you don't know whether you'll be receiving cash from your customers, so of course you're unwilling to release cash to pay your suppliers,' he said.
'But once you're confident that your cash inflow will come, you'll automatically be more willing to release funds to pay your suppliers on time.'
However, he said the global economic climate remained volatile as firms continued to battle the downturn.
'Our latest statistics from a study of some 150 million firms worldwide show that every three minutes, a corporation fails, and every eight minutes, a business goes bankrupt,' he said.
He added that firms were increasingly using credit and payment data available at its SME Credit Bureau as a risk management tool.
Payment data - or what D&B calls tradelines - is typically contributed to the bureau by firms that sign up as members, which include both SMEs and larger corporations.
Local telecommunications giant StarHub, which has been a member of the bureau for about six years, said the database helped in ascertaining the credit standing of its business partners.
'The sophisticated library filled with accurate business and credit information...simplifies the credit evaluation process for us,' said StarHub credit manager Denan Lin.
Over the last six months, D&B Singapore has seen the SME Credit Bureau database grow from 700,000 to over 1.2 million tradelines. D&B has a database of 100 million tradelines on a global basis, and 26 million within the Asia-Pacific region.
