ABOVE: DSO (Days Sales Outstanding) by sector Feb 2017-Jan 2018. (Source: CreditWorks).
Holiday debt ages
Says CreditWorks’ Alan Johnston: “In a nutshell, as expected, overall debt ageing increased on average by around 3½ days between December and January.
“This is up by almost 7 days since November, and seems to be the pattern for this time of the year with Christmas credit card spending due for payment and a lack of customer-to-company communication through the Xmas break usually contributing to this outcome.”
Interesting to note that, broken down, each sector is also reflecting a remarkably similar DSO result to the same time last year (see graph below).
Looking out a little further, Alan Johnston says: “Expect a similar result for February, where the shortened month and debt hangover from January, will still adversely impact DSO.”
No shortage of work
Alan Johnston also notes that although February traditionally results in a peak in liquidations in the construction industry, thanks to accumulating Christmas debt, this year may be an exception to the rule.
“Given the work still currently available for builders and tradesmen, if this occurs again this February, it can only be put down to poor management and debt control during the holiday season, as there is no shortage of good paying work available.”
Having said this, it’s also clear that overall debt levels on the CRISworks database are down on peak times, as a result of shortened January work days. Debt should however start to climb from here on in.
BELOW: Total Debt on CRISworks database to Jan 2018. (Source: CreditWorks).