Credit crunch: Retailers' woes intensify as late payments climb in Q2

Blame vanishing tourists and a sales slowdown.

A sharp decline in tourist arrivals has produced multiple problems for the country’s retailers. Apart from a sales slowdown, retailers also grappled with a worrying rise in late payments in the second quarter of the year.

According to the Singapore Commercial Credit Bureau (SCCB), payment delays within the retail sector have also deteriorated last quarter, increasing 2.87 percentage points from 46.42% in Q1 to 49.29% in Q2 2014.

The furniture and home furnishing stores, retailers of building materials and garden supplies, and automotive dealers experienced the largest increase in slow payments, registering 13.56 percentage points, 8.92 percentage points and 4.16 percentage points respectively.

However, on a y-o-y basis, slow payments within the sector dropped sharply by 7.46 percentage points.

According to Audrey Chia, D&B Singapore’s Chief Executive Officer, “The downward trend in payment performance clearly reflects how slower economic growth last quarter has impacted the ability of firms in meeting their debt obligations. The deterioration in payment performance was most evident in the construction and services sectors as growth within these sectors have been lackluster and have slowed down considerably. Only slightly more than two-fifths of the payment transactions within these sectors are prompt.”

She also noted that there is a rising phenomenon of partial payments as firms strive to remain creditworthy in the eyes of their creditors.

“As global uncertainties continue to prevail, firms will have to exercise greater flexibility in adapting their cashflows and credit management policies according to volatilities of the macroeconomic environment. Partial payments may the most viable option for cash-strapped firms.” she stated.