Treasury News Network

Learn & Share the latest News & Analysis in Corporate Treasury

  1. Home
  2. Cash & Liquidity Mngm in Europe
  3. Accounts Receivable Management

Europe’s businesses see no sign of rally, cutting staff to balance late payments

Intrum Justitia, the leading credit management group in Europe, in their latest in depth annual written survey of 10,000 businesses in 31 countries in Europe plus Turkey and Russia, report the responses and analysis shows that: 

  • bad debt loss will increase from 3.0% to 3.1%, and now stands at a €360 bn
  • 40% of respondents had no plans to recruit any new employees due to the severity of late payment, while 26%  said late payment had obliged them to dismiss employees
  • 46% forecast that payment risks will increase
  • role of credit management tools at a micro level is now critical in reducing bad debt risks
  • main risk for late payment is financial problems being suffered by their debtors, and the second reason was intentional late payment
  • 51% of participants blamed admin inefficiency in not following up on late payment quickly enough
  • increasing risk of late payment reported in Portugal, Greece, Spain, Romania and Italy.

Payment duration has not changed much:

  • for consumers, the time has decreased to 34 days on average form 36 days last year
  • for business-to-business, the time has also decreased from 49 to 47 days, although bad debt has increased or remains stable in 21 of 31 European countries
  • public sector, average time to be paid has shrunk to 58 days from 61.

Consequences of late payments

In 18 of the 31 European countries surveyed, loss of income due to late payments has either worsened or at best stayed the same level as last year. And in 20 countries surveyed, respondents said liquidity is being squeezed as well. 50% of respondents said that late- and non-prohibited the growth of their company.

(The ‘European Payment Index 2014’ report is available here.)

Large companies are borrowing off smaller companies

The 2011 EU directive which has been adopted by 27 out of the 28 member states, sets limits on how long public and private sector companies can keep their suppliers waiting – 30 and 60 days respectively.

Sadly companies are not sticking to the directive. In the UK where the government has adopted the directive, companies are not complying, e.g. UK retailer Marks and Spencer extended its supplier terms last September from 60 to 75 days.

CTMfile take: This report shows that late payment and extending payment terms unnecessarily impacts employment and companies throughout Europe. Companies that do this should be held to account.

Like this item? Get our Weekly Update newsletter. Subscribe today

Add a comment

New comment submissions are moderated.