The Trade Bureau platform of RAM Credit Information Sdn Bhd (RAMCI), one of Malaysia’s leading credit reporting agencies, today announced the RAMCI 3rd Industry Debts Turned Cash (RAMCI i-DTC) which measured payment data between Q4 2017 to Q3 2018.
RAMCI’s i-DTC measures the average number of days companies in various industries take to pay their creditors after the invoice date, it is based on more than 500,000 payment records on business corporations and SMEs across a total of 12 industries’ indicators and it is segregated by industry to allow a clearer picture of how fast companies in each industry pay their creditors.
“We make it a priority to share detailed trade payment information via RAMCI’s i-DTC to help companies better manage their cash flow and limit their credit risk.
“It is important that creditors are aware of the latest i-DTC trends and also implement appropriate payment processes with their debtors to ensure that they get paid on time,” said RAMCI chief executive officer, Dawn Lai.
RAMCI’s i-DTC indicators revealed that the overall payment speed has declined in Q2 and Q3 2018 as compared to Q4 2017 and Q1 2018 as the average payment process across 12 main industries increased up to 75 days in Q2 2018.
It is similar to the uptrend in Q2 2017, although with a higher increase in 2018 but this is probably due to the extended break over the Raya season in Q2, coupled with Malaysia’s 14th General Elections and other long holidays in the same period, it improved to 71 days in Q3 2018.
Data also show that service related companies in the Education, Hospitality and Food/Beverage industries which used to make payments promptly in 2017, are taking longer days to pay off their creditors, almost doubling the i-DTC trend reported in 2017.
While the majority of companies still grant credit terms in the range of 30 days, the Construction, Retail and Wholesale industries provide 10 per cent -15 per cent of their customers with longer credit terms of 60-90 days, this is a norm for these two industries to provide longer payment terms for their customers.
However, most of the industries tracked in RAMCI’s i-DTC failed to pay their suppliers within the 30 days term, instead, the payment is stretched for another 45 days on top of the credit terms given.
“In terms of trade defaults, RAMCI’s i-DTC did not observe any significant deterioration trend from the trade payment defaults over the last 12 months among larger firms.
“However, there is a higher number of trade defaults from smaller businesses (sole-proprietorship/partnership),” Lai added.
She advised Malaysian businesses to be more vigilant and adopt available technology to automate and help speed up payment collections as this is crucial in managing the challenge between timely collection from clients and payment to suppliers.
By taking into consideration the average i-DTC for their debtors' industries, businesses particularly SMEs, can manage their cash flow better to ensure business sustainability especially during a slower or subdued economic climate.
“Companies should also make use of credit tools available in the market such as RAMCI's Creditrack and Trade Bureau service to track their customers' payment behaviour and creditworthiness.
“Some of the preemptive actions include closely following up on payment status and subscribing to external warning alerts to detect first signs of deterioration of credibility among their customers,” Lai concluded.
Data reported in RAMCI’s i-DTC was derived from RAMCI’s Trade Bureau, an independent and neutral sharing platform, established since 2004 with over 1,500 data contributors nationwide.
