Prevent bankruptcy of SMEs and VSEs

In 2023, payment times in Europe will return to pre-Covid crisis levels, with an average delay of 13 days. Prevent bankruptcy of SMEs and VSEs.

Altares just presented a scenario for late payments by companies in Europe and France in the second quarter of 2022. While they had been rising rapidly since the summer of 2020, reaching 14.5 days in the fourth quarter of 2020, Europe-wide late payment rates are rapidly decreasing to return to pre-crisis levels.

Currently, almost one in two European companies (48.4%) pay their suppliers on time. This dynamism is driven by practices that remain well-established among companies in Germany and the Netherlands.

While Europe faces deep turmoil, corporate payment practices remain very liberal. Indeed, companies are redoubled their efforts to maintain good relations with their suppliers at a time when supply chains are facing multiple crises.

Europe is meeting its deadline, buoyed by the clear progress of France and Belgium and the historically good behavior of Germany and the Netherlands. France has returned below the symbolic limit of 12 days.

reminder of the law

The period agreed upon between the parties to settle the dues shall not exceed 60 days from the date of issue of the invoice or, in the form of a deferment, 45 days at the end of the month, provided that the deferment period is recorded in the contract Are. Moreover, it should not be considered as blatant misconduct in relation to the lender. Further, the period for payment of periodic invoices cannot exceed 45 days from the date of issue of invoice.

Ultimately Transparency and Sanctions: “Name and Shame”

The fear is that these designations will be just a publicity stunt and bad payers will continue not to pay.

Relationship between late payments and company size

Data shows that the bigger the company, the more the delay in payments.
In Q2 2022, organizations employing 200 to 999 people show a delay of 13.7 days (+2 days compared to the average for all sizes).
The largest structures with at least 1,000 employees have an average delay of 16.7 days, or more than 5 days late compared to the average.
In contrast, structures with 10 to 49 employees have traditionally performed better. This is currently in case of moratorium of payments of less than 11 days (10.8 days). Most small companies with fewer than three employees have not been able to shut down within 12 days since the health crisis. Late 2021 and early 2022 also see stress on payments.

B2C activities are becoming increasingly weak.

The textile sector was particularly affected.

The activities that see the least virtuous behavior continue to be B2C activities, which have weakened since the Covid crisis. These include catering (19.4 days), hairdressing or beauty salons (19 days) and retail clothing trade (17.6 days).
The textile-textile sector is also under pressure in B2B. Wholesale trade shows delay of more than 18 days. However, in the manufacturing sector, the gap which reached 12 days in 2021 has gone back to more than 13 days since the beginning of the year.

“Bad Payer” Zone

The field of activity in which the companies operate can partly explain these differences. For example, a large proportion of SMEs operate in trade or accommodation and catering, where customers pay fairly quickly because they are domestic.

In contrast, sectors whose customers are mainly professionals face multiple delays. The situation is particularly bad for regions ” information and communication “ And Professional Advice and Services, where nearly two out of three companies experience delays of more than 60 days. Furthermore, more than half experience a delay of more than a month.

Reasons for these late payments?

As per the report of observatory of payment terms

– an organization that is poorly adapted to the law

The delay in payment of a company can be explained by an organization that is poorly adapted to the regulations. Thus, an insufficient number of payment operations during a single month, internal verification and validation circuits that are too long or too complex, especially when accounting services are localized, outsourced or shared.

– An Accounting Circuit: A Labyrinth

For many SMEs, the accounting circuit systematically involves business manager approval and verification. Some companies do not estimate the due date of invoices, which are paid when they become due. Record all other invoices at the end of the month, regardless of their date of receipt. They calculate the due date from this recording date and hence there is a clear loss of cash.

– Disputes that prevent payment

The existence of disputes also explains the delay in payment. Indeed, in the event of a dispute, companies often prefer to wait for the receipt of the credit note relating to the disputed invoice to proceed with the payment.

– Globalization of Payments

Thus, some organizations apply a common payment deadline to all their suppliers, ignoring the special deadlines that exist for certain sectors, and therefore make premature payments.

– Waterfall of financial difficulties

Financial difficulties of customers can frustrate suppliers and invoices can be sent late.

Maintaining employment is very important for SMEs and VSEs to pay off at the earliest.

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