2 July 2015
Regulations needed to ensure firms pay bills promptly: Industry groups
SINGAPORE: Industry groups have said regulations are needed to ensure that bills are paid promptly. They believe that this will help firms manage their finances better, giving them greater confidence to pursue overseas expansion opportunities.
According to the Atradius Payment Practices Barometer report released in November, Singapore firms rank poorly when compared to their regional peers, in terms of making prompt payments.
With goods and services continually flowing in and out of Singapore, it is important that payments are received on time. But based on the report by credit insurer Atradius, 41.5 per cent of invoices remained unpaid by businesses in Singapore on their due date. This is much higher than the average of 36.2 per cent across the Asia-Pacific.
The Association of Chartered Certified Accountants (ACCA) said that one reason for this could be that as an open economy, Singapore is more susceptible to overseas late payment risks, which in turn affects the companies' cash flow.
Mr Shanker Iyer, chairman of Iyer Practice and fellow member of the ACCA, said: "Singapore is a very internationally exposed country. Therefore, most businesses in Singapore will tend to have international business rather than domestic markets only. And therefore, with their customers being overseas, they are more exposed to longer credit periods."
ACCA said the Government can step in to help, by making it easier for firms to file claims as well as making invoicing and payments more transparent. It added that the authorities can also help firms tap more avenues of funding and trade credit insurance. Governments can also boost the supply of credit information through mandatory payment-terms reporting for companies.
Meanwhile, the Association of Small and Medium Enterprises (ASME) said that any overall approach to curb late payments should involve regulating large companies with strong buying power, as some are slow to settle their bills.
Said Mr Kurt Wee, president of ASME: "Generally, we find that SMEs are quite happy when they are supplying to the Government contracts because the terms are fixed, payments come in a very, very timely manner. So I think what we can do is we can promote this culture a lot more extensively, especially among some of the bigger companies."
According to ASME, late payment is most common in the construction sector, where many sub-contractors are squeezed financially by the more dominant players.
Latest numbers from Singapore Commercial Credit Bureau showed that overall local prompt payments improved in the second quarter of this year, coming in at 48.47 per cent, up from 39 per cent in the previous three months.