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Although credit payment ethics improved in Israel in 2005, the country still ranks among the world leaders when it comes to tardiness in credit payment between businesses.
According to an annual summary of payment ethics in Israel published Tuesday by Business Data Israel (BDI), the average number of agreed-upon credit days in Israel among businesses was 88, compared with an aggregate average of 60 in developed countries.
"Only if the number of agreed credit days falls below the global average of 60, while the number of days in arrears remains below 10, could we declare that the Israeli economy is stable", said Tehila Yanay, BDI general manager.
The average number of actual credit days fell from 104 in 2004 to 97 in 2005, and the average number of days in arrears dropped from 17 in 2004 to 9 in 2005.
Broken down by sector, the most reliable deals in 2005 were made in the entertainment and culture sector, where payments were made 5 days beyond the agreed deadline followed by the pharmaceutical and cosmetics sector, where payments were made 6 days in delay.
The sector with the most lax payment norms in 2005 was among television and radio studios and producers, where payments were made 40 days late followed by transport services sector with 38 days in arrears.
Yanay emphasized that the real test for the economy is reducing the number of agreed credit days, while further reducing the number of days in arrears.
However, the improvement of payment ethics is not set to continue this year.
Nonetheless, some improvement, albeit temporary, is expected at the beginning of the year, particularly in the second quarter, as companies will be under pressure to comply with the new credit regulations, which are due to be fully enforced by July 1, 2006.
Already in December 2005, the number of actual credit days rose from 98 to 99, compared with 95 in December 2004. The number of agreed credit days rose from 88 in November 2005 to 89 in December 2005, the same as in December 2004.
On the whole for this year, Yanay said that after a long period of improvement, the state of payment ethics in Israel would worsen in the third quarter due to increasing pressure by customers to increase the number of credit days and increased use of low-cost credit from suppliers.