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Supply Chain Cash Flow Slows Down
Friday, 12 February 2010 00:00
Payment rate slowed last month after accelerating in December

Cash flowed more slowly through supply chains in January, reflecting longer payment periods among suppliers, transporters and customers in the first weeks of 2010, according to the latest Supply Chain Index released by Cortera.

The rate of payment in Cortera’s January 2010 Supply Chain Index was 9.05 DBT, or days beyond term, a 9.95 percent increase over its December report.

That’s unusual, but not necessarily a bad thing, the business credit bureau explained, as it indicates a return to pre-recession payment trends.

“If history is a guide, we’re about to see a steady, multi-month improvement in payments, cash flow and debt reduction throughout the supply chain,” said Jim Swift, Cortera’s president and CEO. “For stakeholders, quick, reliable payments remain the best way to fuel continued growth throughout the entire supply chain.”

Typically, payment rates get faster and debt becomes more current in January, as businesses pay off bills with fresh cash from holiday sales in November and December. This season that happened earlier, in late December, a possible effect of more cautious inventory restocking strategies, Cortera said.

The 9.05 DBT result was an 18.47 percent improvement over last January’s 10.72 DBT. It also was closer to the 8.75 DBT reported in January 2008, which lends credibility to the idea that many businesses are on the path to recovery, said Swift.

Cortera’s monthly SCI is based on the accounts receivable activity of more than 350,000 businesses, including manufacturers, distributors and wholesalers, retailers and transportation companies.

Journal of Commerce Online, 2/12/2010