Trust on hold: Companies slam brakes on trade credit amid soaring bad debts

Independent Singapore

a day ago

Photo: Depositphotos/ sitthipong.pak.gmail.com (for illustration purposes only)
SINGAPORE: More Singaporean businesses are facing financial strain as unpaid invoices increase, now averaging 6% across industries. This trend points to worsening financial pressure among corporate clients.
According to the recent B2B Payment Practices Trends in Singapore 2025 report by global credit insurer Atradius, featured in the latest SBR report, these unpaid bills, often called 'bad debts,' are steadily impacting profit margins and revealing weaknesses in various sectors.
The sectors on construction and agri-food were hit the hardest, with each industry reporting an average of 7% in bad credits. The energy and fuel sector performs slightly better, averaging a significant 5%.
In response, companies are being more cautious. About half are reducing the trade credit they offer to corporate clients. Others are tightening payment terms to protect themselves from increasing credit risk. Even those offering more credit are becoming more stringent, with constricted deadlines becoming the norm.
At present, more than half, or 54%, of B2B businesses in Singapore are accomplished on credit, with an average payment period of 46 days. Nevertheless, 35% of these accounts end up unsettled, principally because of clients' cash flow problems or unsolved disagreements.
The energy and fuel segment is at the forefront in credit-based transactions at 58%, followed closely by the construction sector at 55%. The agri-food industry, while using the least credit, at 47%, has a very high rate of unpaid accounts, 43% of these accounts are unsettled. This compares to 37% in construction and 30% in energy and fuel.
Despite the increase in bad debt, most businesses, 70%, expect insolvency rates among clients to stay stable in the near future. Nevertheless, companies are not taking risks. Many are stepping up debt collection efforts and reviewing payment policies to safeguard their cash flow.
Around 62% of firms are working to reduce their Days Sales Outstanding (DSO) to improve cash flow. However, slow inventory turnover might limit how much cash can be released.
Adding to the burden, 70% of dealings report being overstretched by contractors and providers who demand quicker payments, further constricting the financial congestion across the supply chain. See also Trump's tariff policy does not represent all of America
As the burden of attaining financial flexibility surges, the corporate world of Singapore is on its way to framing a more vigilant and meticulous credit-aware future. document.addEventListener("DOMContentLoaded", () => { const trigger = document.getElementById("ads-trigger"); if ('IntersectionObserver' in window && trigger) { const observer = new IntersectionObserver((entries, observer) => { entries.forEach(entry => { if (entry.isIntersecting) { lazyLoader(); // You should define lazyLoader() elsewhere or inline here observer.unobserve(entry.target); // Run once } }); }, { rootMargin: '800px', threshold: 0.1 }); observer.observe(trigger); } else { // Fallback setTimeout(lazyLoader, 3000); } });