Credit Management magazine October 2017

PAYMENT TRENDS
A cup three-quarters full
Jason Braidwood FCICM(Grad), Head of Credit and
Collections at Creditsafe Business Solutions, analyses
the latest monthly business to business payment
performance statistics.
A
shock to the system is often
not a bad thing. There are
obvious exceptions to this
rule, but when the outcome
is a pleasant surprise, then
the shock is well worth it.
Happily, a pleasant shock has come about
in this month’s payment performance
figures with 75 percent of industry sectors
reporting a drop in their payment days
beyond terms (DBT). And this isn’t just
an industry anomaly, the positive trend
continues across every region we monitor
on a monthly basis.
Last month we reported that the
industry average for bill paying had fallen
to ten days beyond terms – marking a
performance record for the last three years.
The good news is that the downward, yet
positive, trend continues this month, which
is great to see and proof that we weren’t
experiencing just a ‘silly’ summer season.
Let’s now dig a bit deeper and take a
closer look at where the biggest and best
shocks come from this month.
INDUSTRY SECTORS
The celebrations start with the Financial
and Insurance sectors which had a return
to a much improved DBT score of just over
ten days. This is an improvement of nearly a
week (6.5 days) compared with last month,
which will be welcome news to the many
services and technologies suppliers.
In close second place is Business Admin
and Support, arguably the backbone of many
organisations and rarely a sector that gets
the spotlight it possibly deserves. But this
is the month to champion administration,
with the sector seeing a decrease of over
six days DBT from last month, and its best
payment performance for the year to date.
Also featuring in our ‘Top Five’ best
performing sectors are the Real Estate and
IT sectors – both succeeded in dropping
their DBT score by five days or more in the
last month. With both industries falling
well within single figures – they’re back on
terms with performances we saw earlier in
the year.
We recently heard warnings in the news
from the Specialist Engineering Contractors
Group (SEC) that the current cashflow
problems in the construction industry are
unsustainable, with too many contracting
authorities not considering themselves
as compliant with agreed payment terms.
Interestingly, from our own data we have
seen the construction industry hovering
around the 13/14 DBT mark, which puts
the sector in the top 50 percent of slowest
payers, but equally out of the Top Five worst
offenders for 2017. It is also worth noting
that the construction industry enjoyed its
most successful month of prompt payment
for the year to date, and more notably still
since April 2016. No mean feat and we hope,
a sign of renewed commitment toward
better payment practices.
And while we’re keen to keep the mood
buoyant, it would be too hasty of me to
imply that every sector delivered a personal
best. For home businesses, the contrast
on last month’s performance was
concerning, rocketing to over 17 days
beyond terms, and now the worst paying
industry. We hope that home-working
SMEs, entrepreneurs and freelancers
manage to get back on track before we
hit Q4 and the nights inevitably begin to
draw in.
REGIONS
The second pleasant surprise is that despite
a bad month in August, the South West has
come back fighting and regained its crown
as the promptest paying region in the UK,
bringing its total DBT down to 8.5 days – a
reduction of over five days.
The South West’s gain was East Anglia’s
loss, which fell to second place this month,
but still with an impressive fall to over
nine DBT compared with double figures in
the previous month. We can see a contest
heating up between these two regions;
feel free to place your bets but we won’t be
supplying odds!
With all this positivity, it’s important to
not forget the very important issue at hand
here. Late payment, whether it’s by sector
or by region, continues to be a chronic
issue. Many businesses, particularly SMEs
and even more so micro-businesses, need to
be paid promptly in order to keep a healthy
cashflow as they simply do not have the
luxury of being able to absorb late or nonpayment.
Shifting this culture of routine
late payment is a challenge still to solve and
when we do – that will be the biggest shock
of all.
The Recognised Standard / www.cicm.com / October 2017 / PAGE 38