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Time for change of attitude on late payments

A payment report by Intrum, European Payment Report 2018, gathered data from almost 1,000 companies across the EU to gain insight into the payment behaviour and financial health of European businesses.

The report, which in particular looks at the impact of late payments, found that:

  • 1.69 per cent of annual revenue had to be written off due to non-payment in the past 12 months.

This sounds bad, but it's actually an improvement on 2017 figures, which showed that 2.14 per cent was written off and 2.44 per cent in 2016.

The report also shows that payment times in Europe are improving, with the average time for B2B payments now on average 34 days, down from 37 days in 2017. However, payments from the public sector still take on average 40 days across Europe, despite it being mandatory for public sector entities to pay suppliers within 30 days.

Late payments hamper business growth

At the same time, late payments continue to be a problem, hampering business growth for many. The Intrum survey found that 28 per cent of the respondents surveyed experience late or missing payments as hindering growth and 21 per cent say that they are unable to hire new staff because their clients fail to pay them on time.

However, the practice of asking suppliers and vendors to accept longer payment terms still persists, as the report also highlights that:

  • Nearly 6 out of 10 of the companies surveyed say that they have been asked to accept longer payment terms than they are able to manage in their daily operations, and more than half (56 percent) also admit to having accepted these demands.

Stop taking advantage of sub suppliers

Intrum's CEO, Mikael Ericson, writes: “Clearly the European directive already implemented to tackle late payments has not been sufficient to address the misconduct against Europe’s SMEs. All member states should have implemented the directive into local regulations by now, but it appears as if this has had very little effect. Only 58 per cent of the companies surveyed are aware of local legislations that are in place to protect them from late payments. Awareness of the European Directive is significantly lower, at a mere 28 per cent.”

Ericson adds: “Legislation is important, but clearly a change in attitude and behaviour must also derive from a willingness to do the right thing and stop taking advantage of sub suppliers who are dependent on their larger clients.”

This item appears in the following sections:
Payments - Making
Accounts Payable Management
Paying Suppliers

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By Paul Stheeman on 10th Jul 2018:

As I have stated here before, it is unethical to make late payments. Such behaviour should be considered bullying your smaller partners.

The best way of changing people’s attitudes to this would be to have punctual payments as a KPI in annual performance reviews.

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