SEASONAL DEBT LEVELS FLATTER TO DECEIVE?

By NZHJ January 18, 2017 Industry news

Our regular report on debt in the channel from CreditWorks for the final months of 2016 shows debt level down but warns now is not the time to leave your debtors to their own devices.

 

Early 2017 channel debt positive

After reasonable growth throughout November, the expected slight drop off in the overall size of CreditWorks’ debt database in December. This was primarily due to two factors, the short month and reduced sales in the last week of the month.

Nevertheless, overall debt levels (see chart above) stayed higher than previous years and are expected to remain high going forward.

January’s debt numbers are also expected to be down, although unpaid December debt may well artificially inflate the figures slightly.

DSOs expected to climb

Average DSO (see chart below) throughout the building sectors remained relatively steady over November and December, also as expected, although the roofing sector did show significant recovery in December, after a slight blowout in November.

With both customers and suppliers impacted by holiday absenteeism, and other debt obligations incurred throughout December, CreditWorks predicts we will see an increase in DSOs over the next couple of months.

Maintain close watch on debtors

With this in mind, CreditWorks’ Alan Johnston says: “Suppliers need to be mindful that we are approaching the period when most business failures occur (mainly February and early March) so vigilance and tight controls on debt need to be applied.”

[ Below: DSO (Days Sales Outstanding) by sector Jan 2015-Dec 2016. ]

share this