Survey findings for Sigapore
Singapore sells on credit terms more often than any other market in Asia
Singapore tops the table of Asian countries trading on B2B credit. 59% of all B2B sales in the industries we surveyed (agri-food, chemicals and construction) are made on credit, higher than the 54% for Asia as a whole. compared to last year, Singapore’s credit sales have dipped slightly from 61% to 59%, however a significant number of businesses told us they either increased or did not alter the frequency of credit sales in the months following the outbreak of the pandemic. This was on average 43% of respondents, almost in line with the response rate in Asia.
The comparison between the average amount of sales to B2B customers transacted on credit by businesses polled in Singapore and those transacted on credit by their peers in Asia point to a significantly greater role played by trade credit in B2B trade relations of Singaporean
businesses than of businesses in Asia. When comparing the use of trade credit between domestic and export markets it is clear than businesses in Singapore prefer to offer credit terms to domestic customers. 62% (regional average: 56%) of credit sales were with domestic customers, whereas export credit sales were reported by 38% of respondents, (regional average: 44%). From an industry standpoint, the Singaporean construction industry is the most likely to trade on credit terms, with an average of 68% of its B2B sales made on credit (consistent with the average for the industry in Asia). The Singaporean chemicals industry ranks second, with 60% credit sales (higher than 54% in the same industry in Asia). The agri-food industry follows with an average of 57% credit sales (also higher than the 52% average for the industry in Asia).
Singapore: how do you expect your business performance to change over the coming months?
Which key developments will drive your business improvement?
A quarter of businesses use trade credit to gain a competitive edge
Almost a quarter of the businesses we polled in Singapore (24%) told us that they increased the use of trade credit to stay competitive in their markets. This was significantly higher than the 13% average reported across Asia and the highest percentage in the region. Similarly, more businesses polled in Singapore (20%) than in Asia (8%) reported increasing the use of trading on credit to provide their customers with short-term finance. In effect they
gave their customers longer to pay if they were awaiting payment from their own customers. conversely, using trade credit to encourage repeat business was less commonly cited by businesses in Singapore (37%), than the Asian average (54%). The same goes for using credit to win new customers. This was reported by 26% of the businesses we interviewed in Asia and 20% in Singapore.
of the businesses polled in Singapore are of the opinion that selling on credit to B2B customers will become an increasingly widespread business practice over the next 12 months. (regional average: 36%)
Atradius Payment Practices Barometer – June 2021
Companies who do not outsource collections observe more bad debt challenges
More businesses in Singapore (51%) than in Asia (41%) reported no change in administrative costs associated with management of accounts receivable arising from B2B trade in the year that followed the pandemic outbreak. 39% of businesses reported an increase in administrative costs (regional average: 49%), and most of these were spent on credit reports from specialist agencies.
However, the capital costs (i.e. financing or interest costs paid during
the time-lag between the credit sale and the settlement of the invoice) did not change significantly for businesses in Singapore over the past year (likewise for their Asian counterparts). On a less positive note, bad debts increased for more businesses in Singapore (36%) than in Asia (33%) over the past year. This was most often cited by businesses that opted to manage the collection of long-term overdue invoices internally, rather than in outsourcing.
China: how do you expect your business performance to change over the coming months?
Which key developments will drive your business improvement?
Payment terms hold steady
Over the past year, most of the businesses we polled in Singapore (57%) did not alter their average payment terms. Their Asian peers reported a similar position. Those that changed payment terms most often gave their customers longer to pay (cited by 33% of businesses in Singapore and 35% in Asia). A breakdown of payment terms by industry can be seen below, in the overview by industry section. 52%
most often set payment terms according to their company standards (regional average: 53). Additional reasons cited by respondents include reflecting the payment terms of their own suppliers, as well as being guided by the availability and cost of capital needed to finance credit sales. This suggests a strong focus on working capital requirements, although this is less strong in Singapore than in Asia.
Respondents reported an increase in overdue B2B invoices
More respondents in Singapore (45%) than in Asia (40%) reported an increase in overdue invoices over the past year. On average, overdue invoices were settled within one month past due, longer than last year’s 22-day average. This affected an average of 52% of all B2B invoices
(Asia average 50%). A similar trend was evident in the case of long-term overdue invoices (over 90 days overdue) which appeared to impact businesses in Singapore slightly more than others polled across Asia and in write-offs (6%, compared to 5% in Asia).
Liquidity issues and cost containment top future business concerns
More businesses in Singapore (32%) than in Asia (26%) expressed concern about maintaining adequate cash flow over the coming months. The unsuccessful containment of costs negatively impacting business profitability, is a concern for more businesses in Singapore (23%) than in Asia (20%). This is likely to be partly caused by the increased costs experienced in relation to the management of B2B receivables and bad debts. Interestingly, businesses in
Singapore appear far less worried than their peers in Asia about any possible fall in demand for their products and services over the next months. This concern was expressed by 9% of Singaporean respondents compared to 15% in Asia. Similarly, the continuation of supply chain disruptions arising from the impact of the pandemic appears to worry businesses in Singapore (9%) more than their Asian peers (7%).
Businesses in Singapore far more optimistic than Asian peers as to improvement in business performance stemming from domestic economic rebound
Looking ahead, half of the businesses polled in Singapore (on par with the regional average) appear to be optimistic about an improvement in their business performance (sales and profits) over the next 12 months. For one in two businesses in Singapore and Asia alike the expected improvement in business performance will be mainly due to a rebound of the domestic economy. 32% in Singapore (36% in Asia) believe that the improvement will stem from a combination of healthier export flows and the domestic economic rebound. Interestingly, more businesses in Singapore (20%) than their peers in Asia (15%) believe an improvement in
business performance will come exclusively from exports. This is may be a reflection of the fact that export trade is the source of most of Singapore’s revenues. Against this backdrop, far more businesses in Singapore (43%) than in Asia (36%) are of the opinion that B2B credit sales will become an increasingly widespread business practice over the next 12 months. The primary reason cited for this is to allow customers more time to pay, followed by the desire to stimulate demand from customers, particularly in the industries where it may have dropped due to the pandemic economic downturn.
Trade debts securitisation becoming more popular amongst businesses in Singapore
37% of businesses, (regional average: 34%) told us they plan to securitise receivables more often over the next few months to reduce outstanding trade debt, minimise credit risk and avoid liquidity constraints. To protect the business from trade credit risk, 35% of the businesses we polled in Singapore (regional average: 42%) plan to request guarantees of payment from customers more frequently over the coming months. In-house retention and management of customer credit risk through selfinsurance is planned by 33% of businesses (43% in Asia). These
respondents told us they aim to intensify their invoice collection efforts over the same time frame, especially the collection of long-term overdue invoices (more than 90 days overdue) to help minimise DSO deterioration. 26% of the businesses we polled in Singapore (regional average: 37%) plan to resort to trade credit insurance more frequently over the coming months. 36% of the businesses polled told us they expect dSO to deteriorate (regional average 38%), whereas just 12% expect it to improve over the coming months (regional average: 10%).