Malta debt-repayment average of 80 days still one of EU’s highest
Malta’s average duration for debtors to settle their dues with suppliers was 80.41 days in 2023, a negligible change of 0.55 days compared to the previous year’s survey
Malta’s average duration for debtors to settle their dues with suppliers was 80.41 days in 2023, a negligible change of 0.55 days compared to the previous year’s survey.
The survey is collected by the Malta Association of Credit Management (MACM) amongst suppliers who sell on credit in Malta, and other creditors hailing from all sectors of the Maltese economy.
The average DSO (days sales outstanding) is also referred to as the ‘payment collection ratio’, representing the average time taken by customers in settling their invoices.
But the DSO of 80.41 days is still relatively high when compared to the average DSO of other European countries which on average read 56 days for business-to-business, 33 days business-to-consumer, and 69 days for the public sector, which have all increased from previous year.
Debtors represent on average about 40% of the total assets of the balance sheet of most firms, which assets are deemed liquid.
“A high DSO figure would not help the cash flow of a business and may also hinder further business growth,” the MACM said.
A number of external factors may influence the DSO ratio. “The aim of good credit management is to contribute directly to profitable sales growth. Therefore, sales and revenue should not suffer at the expense of reducing the DSO,” the MACM said.
When using DSO to measure the effectiveness of the credit function, other relevant financial ratios must be taken into consideration, such as profit. “The DSO alone does not account for customer retention, nor does it measure customer satisfaction, which is required to sustain long-term customer relationship, hence maintaining competitive advantage on the market,” the MACM said.