Credit payment improves in March, but payment ethic deteriorates

Economists attribute improvement to pressure by suppliers on customers to cut number of credit days, concentrate efforts to collect debt more swiftly.

By SHARON WROBEL
April 13, 2009 14:03
2 minute read.
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Suppliers are pressing clients to pay closer to their agreed payment dates in light of the credit crisis and the rise in business risk, but the payment ethic across many sectors of the economy is worsening, according to the payment ethic index published by Business Data Israel on Sunday. The average number of total late payment, or credit, days improved in March to nine days, two days less than in February, the payment reliability report compiled by BDI showed. The average credit period agreed to by businesses also remained unchanged in March and stood at 91 days. Economists at BDI attributed the improvement to pressure by suppliers on customers to cut the number of credit days and to concentrated efforts to collect debt more swiftly in view of the growing risk faced by businesses. At the same time, though, the payment ethic in 42 percent of surveyed business sectors (13 out of 31 sectors) deteriorated last month compared with February, while in 19% of business sectors the payment ethic was unchanged. The construction sector had the most lax payment norms in March; the average payment by both buildingmaterial and wholesale suppliers and building contractors was 23 days beyond agreed deadlines, BDI said. The food and beverages manufacturing and wholesale sector came in second place with 21 late payment days on average. The most reliable deals were made in the paper and carton manufacturing and wholesale sector, where average payment was two days late beyond the agreed credit days during March. The next best was the transport, storage and logistics sector, with an average of three days of delayed debt payment. A separate BDI report also released on Sunday showed that the deterioration of the average weighted risk level in the economy halted in March compared with the previous month but worsened compared with the same month last year. The March index remained unchanged at 6.25, as in February, but it was up from 5.83 in March 2008. The weakest sector last month was the restaurant and cafe sector, with an average business risk level of 7.30, followed by the transport services sector at 7.06 and the tourism and hotels sector at 6.87. The strongest sector in March continued to be chemicals, with an average business risk level of 4.96 compared with 5.29 during the previous month. That was followed by the cosmetics and pharmaceuticals sector, with an average of 5.43, and the paper and carton sector, at 5.82.

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