Helping Malaysian Businesses Make Prudent Decisions for Cash Flow Management and Limit Credit Risks
Average Industry Debts Turned Cash (i-DTC) for 12 industries for Q3 2016 - Q2 2017
KUALA LUMPUR: The Trade Bureau platform of RAM Credit Information Sdn Bhd (Ramci), one of the leading credit reporting agencies, today released the Ramci 2nd Industry Debts Turned Cash (Ramci i-DTC) indicators measured from the last four quarters, Q3 2016 to Q2 2017.
Ramci’s i-DTC measures the average number of days companies in various industries take to pay their creditors after the invoice date. A total of 12 industries’ indicators are being released today, with the latest inclusion of the Education industry.
Ramci’s i-DTC indicators revealed that companies in the Agriculture, Construction and Manufacturing, have a notably improved trend in terms of the speed in making payments over the last few quarters, consistent with the broadly positive business prospects for these three sectors.
However, services related industry such as the Information, Communication & Technology (ICT), Financial Services and Real Estate sectors experienced a decline trend in payment speeds over the same period.
For the Real Estate industry that includes property companies and real estate firms, it is probably due to a slowdown in sales over the last 2 years which contributed to them being stretched in their cash flow. As for ICT and Financial Services industries covering generally larger corporations such as banking & financial institutions, telecommunication and IT companies, it could possibly be due to a lengthening of payment processes.
On the other hand, the Hospitality & F&B and Education industry (new addition) seems to be prompt paymasters with an average of 30-days payment for Hospitality & F&B, and slightly over 30 days for Education.
RAM Credit Information Sdn Bhd chief executive officer Dawn Lai said, “For creditors who extend credit to companies in these few industries, it is important to continue to watch for the i-DTC trend and work out an appropriate payment process with their debtors to ensure they get paid promptly.”
The average i-DTC trend across all industries have seen a slow creeping up, to 70 days in Q2 2017, from 66 days in Q1 2017. While the majority of companies still grant credit terms in the range of 30 days, the Construction, Retail and Wholesale industries requires longer credit terms of 60 days to 120 days.
“The Ramci i-DTC data also indicated that the defaulted payments for total business corporations is on slower pace of increase with an average of 0.38% increase per month, representing a compounded growth rate of 4.56% over the 12-months period, as compared to previous 12-months compounded growth rate of 7.41%,” Lai continued.
This indicates a positive sign that the Malaysian economy condition is stabilising, consistent with the upward revision of GDP growth and the broadly positive business sentiment of latest release of RAM Business Confidence Index, a quarterly business survey jointly conducted by RAM Holdings and Ramci on over 3,000 corporate and SMEs.
Lai recommended that while managing cash flow is important in ensuring sustainability of their business, SMEs need to be more vigilant in their payment collections, taking into consideration the average i-DTC for their debtors' industries.
“Companies should make use of credit tools available in the market such as Ramci's Trade Bureau service to continue to track their customers' payment behaviour. Take preemptive actions in payment follow up with early warning alerts to detect any first sign of deterioration of credibility on their customers,” she added in a statement.
“It is our main objective to continue to make the effort to share detailed trade payment information such as this to assist companies better manage their cash flow and limit their credit risk,” Lai said.
The Ramci i-DTC indicators are based on more than 450,000 payment records on business corporations and SMEs measured between Q3 2016 to Q2 2017, and segregated by industry to allow a clearer picture of how fast companies in each industry pay their creditors.
The data was derived from Ramci’s Trade Bureau, an independent and neutral sharing platform established since 2004 with over 1,000 data contributors nationwide.
About RAM Credit Information Sdn Bhd
RAM Credit Information Sdn Bhd (Ramci) has established itself among Malaysia’s leading and trusted credit and business information bureaus in recent decades and has a comprehensive database that has been built over the past 25 years. Today, Ramci’s institutional partners such as RAM Holdings Berhad and Experian Asia Pacific have availed the company to extensive domain knowledge to serve both businesses and consumers in Malaysia and globally through its comprehensive array of services. It also collaborates with associations and cooperatives to serve their members. Ramci's core capabilities include online credit information, credit rating and credit scoring services, monitoring and international information services and trade bureau services. For more information, log on to www.ramcreditinfo.com.my
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