The latest Directive on Late Payment (2011/7/EU) became active across the European Union in March 2013. The directive is now law in all European Union countries. In addition it is also law in the European Economic Area (Norway, Iceland and Liechtenstein), and in Switzerland, as part of the trade treaties those countries have with the European Union. 

The basic provision of the Directive is to make it very difficult to trade on terms of more than 60 days for any contracts signed after March 2013. This still means that many European companies still have the opportunity to extend payment terms, but it curtails some of the more extreme activities of supply chain finance and the more aggressive retailers. 

The biggest issue with this Directive is that very few companies really know what the new law is and how to maximise their opportunities. The fault can be squarely placed at national governments who have failed in their legal duty to publicise the legislation. 

Informita’s assessment

Given that the legislation is not retrospective, Informita expect that the impact of the Directive will take several years to feed through to balance sheets across the continent. 

For more details download Informita updated insight paper, see.