Construction supply dealers are getting paid at the fastest rate in five years while writing off less bad debt--trends that may be occurring mainly because most of the bad customers have already been culled, a new ProSales survey indicates.

The poll of 194 building product dealers and wholesalers nationwide found respondents reporting an average of 42.31 accounts receivable days so far this year vs. 42.72 days in 2010. Looking solely at the 148 dealers taking part, A/R days dropped to 43.26 this year from 2010's 43.91.

This is the fifth year that ProSales has conducted this survey, and it's the first time dealers reported average A/R days as low as 43. They peaked at 49.76 days in 2009.

Roughly 27% of the dealers and 28.3% of all respondents reported increasing bad debt reserves this year. In past years, as many as 44.6% of the dealers hiked bad debt. And the amount by which the reserves increased this year--an average of 16.21% extra for dealers alone, 16.6% for all respondents--was less than half the increase reported last year.

About 12.9% of dealers (and 14.2% of all respondents) said they have written off an increasing amount of bad debt this year compared with January through August 2010, 41.9% of dealers (42.6% of all respondents) said the amount written off had held steady, and 45.2% of dealers (43.2% of all) said their writeoffs had decreased.

Lien activity also appeared to have steadied, with 57.1% of dealers saying the number of liens they have issued this year is about the same as in 2010. A total of 18.3% of the dealers reported more lien activity, while 24% reported less. The percentages for all respondents was virtually the same.

Dealers say the numbers, when combined with their anecdotal observations, show how the housing bust has put so many weak builders out of work.

A/R has improved because the spec builder is the typical customer who uses/abuses our credit," a Tennessee dealer wrote. "The builders who have survived the recession are those who are better business operators, and they have less need for extended terms. Also, a larger pecentage of our business is custom homes, and as a general rule we get paid quick on [the custom work]."

"We are tighter on credit risk than ever in our history," another noted. Several dealers said the downturn prompted them to improve their credit and collections processes. One dealer reported converting some large past-due accounts to five-year notes on receivables with a balloon payment due at the end--and a signed statement of confession attachted to the note that defaults to a judgment if the customer can't pay. Another dealer indicated that he improved things by refusing to intervene when his accounts payable department was on the job.

"The goodl old days are a thing of the past," an Arizona dealer said. "If we can't get the I's dotted and the T's crossed, we make them pay cash."

ProSales conducted the online survey in August.