More small and medium-sized enterprises (SMEs) - especially those in the building trade - paid their debts on time in the second quarter.

A healthy pipeline of activity in the construction sector led to significant improvement in debt settlement compared with the fourth quarter last year, when a high volume of delinquent payments were recorded, said information services firm Experian yesterday.

About 47 per cent of SME debt was paid on time in the quarter, up from 38 per cent in the last quarter of last year.

This was the best-performing quarter for SMEs since the first quarter of 2017, when 52 per cent of bills were settled on time.

It was largely due to more timely payments from the retail and manufacturing sectors, while only 16 per cent of construction sector firms were more than 90 days late in payments, compared with 35 per cent in the fourth quarter of last year.

The settlement period for construction fell to 39 days, well down on the fourth quarter's 59 days.

The increased number of timely payments within the retail sector is a possible effect of a shrinking market, said Experian.

"To remain competitive in a challenging business environment, retail businesses are now taking on less inventory to improve their flexibility and agility to market, carry less debt, and allowing them to pay creditors in a timelier manner," it noted.

Manufacturing looks to be in a similar position. A protracted slowdown in growth is a likely by-product of the United States-China trade tensions. It is hitting company bottom lines and putting manufacturers under increasing pressure to pay within credit terms, said Experian.

The Days Turned Cash national average - a measure of the debt settlement timelines among SMEs - saw significant improvement, led by construction and retail.

Construction sector growth "may be well set to continue throughout 2019", said Mr James Gothard, general manager of credit services for the region at Experian.

The easing of rules around public projects may have helped SMEs in the building game, potentially enabling a higher number of smaller firms to bid for public sector projects, he added.

Revised rules introduced in June last year exempted companies with annual revenues below $5 million from producing audited financial statements and removed the need to affix company stamps on certain tender-related documents.

Earlier this month, the Singapore Commercial Credit Bureau reported slower payment of bills among local firms.

While manufacturing recorded the largest increase in slow payments quarter on quarter out of the five sectors surveyed, retail and construction registered decreases.

The six-monthly Experian report analyses payments of more than 120,000 firms across retail, wholesale, construction, hospitality/food and beverage, information and communications, manufacturing, services and transport/storage.

The latest report analyses the first two quarters of this year.