Payment practices report
June 2020: companies face worsening B2B payment behavior
The Payment Practices Barometer survey was completed by Singapore businesses during March 2020. The city-state was one of the earliest countries in Asia to report cases of the coronavirus COVID-19, and quickly put measures in place to contain the outbreak long before the World Health Organisation (WHO) characterised the disease as a pandemic on March 11th.
Country Manager for Singapore commented on the report
Economic activity in Singapore contracted severely since the outbreak of the coronavirus pandemic, at the beginning of 2020. This affected exports, due to global supply chain disruptions and deteriorating external demand, and hit domestic demand, chiefly because of the standstill of tourism.
Now that Singapore is taking the first steps to reopen the economy, an assessment over the depth of the contraction will mainly depend on how long and how deep the domestic economy of Singapore, and the economies of its major trading partners, will be affected before a rebound starts.
As a small city-state, which is the main transport and financial service hub for Southeast Asia, Singapore’s economy is strongly dependent on international trade and highly integrated in the Asian supply chain. This makes it highly vulnerable to changes in the global trading environment.
The survey questionnaire was completed by Chinese businesses during March 2020. By mid-March, for the first time, China reported no locally-transmitted cases of COVID-19, leaving behind a January-February nationwide shutdown aimed at containing the spread of the pandemic.
The impact that the virus had on China’s domestic economy and on its growth forecasts for this year are still to be fully assessed. However, most Chinese respondents believe that the economy will improve significantly over the next year.
Key takeaways from the report
Although many more respondents to the Payment Practices Barometer survey in Singapore reported late payments than last year, and a significant percentage of these were long overdue, both performance indicators are better than the regional average. That said, Singapore businesses report a heightened perception of credit risk and almost all of the businesses surveyed are taking steps to minimise these.
Credit risk reduction techniques favoured by respondents to the Singapore survey include reducing single-buyer concentrations, letters of credit, payment guarantees, self-insurance and trade credit insurance. There was an increased preference for cash sales over trade credit, but the fact that as much as two thirds of the sales to B2B customers were made on credit, including within the domestic market, may suggest B2B buyers need suppliers’ help to provide short-term trade financing. Against this virus-tinged backdrop of reduced business confidence is the widely expressed opinion that the government stimulus packages will help support the economy and business liquidity.