Customer Payments Are Slowing, CMI Shows

NACM's Credit Managers' Index (CMI) fell 1.4 points to 51.2 in October. The CMI remains just barely in expansion territory above 50 and its lowest levels seen outside of a recession, said NACM Economist Amy Crews Cutts, Ph.D., CBE.

"Respondents continue to note the financial stress of their customers, asking for term extensions, falling behind on payments and asking for more credit than is warranted, which leads me to think we will see some downward revisions to the private domestic investment numbers in subsequent third quarter GDP estimates," Cutts said.

The index of favorable factors fell 2.7 points to 55.9, led by a 6.1-point drop in sales. The sales factor index has been the most volatile in 2023 and is down 9.3 points from its recent high of 62.0 in June. "The sales factor index, while still in expansion territory, is greatly diminished from where it was in 2021," Cutts explained.

Unfavorable factors fell for the fifth consecutive month in October, this time dropping 0.6 to 48.1. Dollar amount beyond terms led with a decline of 4.9 points to 45.6, its lowest level since April 2020. Accounts placed for collection deteriorated by 1.8 points to 45.6, its lowest level since February and the 17th consecutive month that the index has recorded a value below 50.

"While a few respondents have noted that recent months have been very good, the overwhelming concern cited this month is deterioration in customer cash management," Cutts said. "Whether they are asking for more time to pay, or just ignoring invoices until they get sent to collections, respondents noted that stress is rising in their accounts receivables portfolios."

What CMI respondents are saying

  • "Our collections and past due receivables are roughly the same as last month but there is some slipping of payments and we are getting stretched more now than before, especially with smaller to medium sized companies."
  • "There are more requests for extended terms or delays in payments. Credit collection efforts are taking up more and more time in terms of the overall credit responsibilities."
  • "We are seeing the impact of deflation on some of our product lines. For example, the cost of vinyl gloves, carry-out containers and packaging is down steeply from last year. Units processed are up, but sales are lower (still up from prior year)."
  • "More accounts are going past due for longer than 30 days."
  • "Small businesses are requesting greater credit lines than are supported."
  • "We are having issues with customers paying us that make pressure vessels like campers and boats."
  • "We are experiencing more credit card fraud in the past few months than prior."
  • "We deal with the AG/fishing industries, so this is the natural slow down for new orders, but there has been an unusual increase in AR collections."
  • "Supply chain backlogs are starting to ease."
  • "August was our best month in the history of the company and so that is the reason for the September sales drop off."

Why should you participate in the CMI?

Complete the CMI every month for the next 12 months and automatically be entered into a drawing to win a gift card worth between $100-$250 in 2024. Sign up to receive monthly CMI survey participation alerts. For a complete breakdown of manufacturing and service sector data and graphics, view the October 2023 report. CMI archives also may be viewed on NACM's website.

-Annacaroline Caruso, editor in chief 

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Tuesday, 05 March 2024

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