14.6% of all transactions in Israel in July were in arrears, up from 14% in June and 11.2% in May, according to the Dun & Bradstreet Israel payment ethics index.
D&B Israel managing director Reuven Kuvent said that the increase reflected the growing use of supplier credit. Payments to suppliers are often postponed, with the suppliers effectively financing transactions by credit, which is cheaper than bank credit.
Kuvent said that this trend would continue because inflation is rising and there are expectations of an interest rate hike. “As the cost of financing rises, it becomes more worthwhile for companies to postpone payment to their suppliers. The high July Consumer Price Index (CPI), and expectations that subsequent indices will be high, which are likely to result in an interest rate hike, make it worthwhile for companies to prefer suppliers’ credit over bank credit.”
“However, many suppliers are unwilling to absorb the financing costs and are rolling this cost onto their customers by raising prices.”
D&B Israel says that the average number of credit days in July was current plus 68 days, the same as in June.
A breakdown of payment ethic by industry shows that the building contractors sector had the highest number of average credit days - current plus 84, and grocery stores had the lowest - current plus 56.
Published by Globes [online], Israel business news - www.globes.co.il - on August 13, 2007
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