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Late payments from an entrepreneur’s perspective

Swedish design bureau Kurppa Hosk is one of many smaller companies struggling with late-paying clients. At an Intrum Justitia seminar during Almedalen Week in Sweden, CEO Måns Jacobson Hosk shared his personal experience of the problem.

“The picture in the Intrum Justitia report is very true. The 30 days stipulated in most contracts I can only dream about, as 40 to 50 days are common in our business. The worst we have experienced is 120 to 150 days, and that makes it difficult to sleep at night. You worry about being able to pay your staff. A few years back, for example, we found ourselves in a liquidity situation due to late payments that threatened the whole company, but with the help of Intrum Justitia we managed to sort it out,” Jacobson Hosk said.

Earlier, Intrum Justitia’s CEO Mikael Ericsson had set the scene at the event by highlighting some parts in the European Payment Report 2016, such as the fact that 41% of small and medium-sized enterprises (SMEs) say that late payments limit their growth.

“Larger companies use their strength to prolong payment times and use SMEs as a financing source. It is important that they respect agreed payment times, for the benefit of everyone,” Ericsson explained.

Kurppa Hosk was founded in 2009 and today employs 22 people, with a turnover of around 20 million Swedish kronor. The company works on design and branding assignments for many Swedish and international companies. CEO Jacobson Hosk also backed the report’s finding that late payments hamper growth.

Måns Jacobson Hosk“When you are paid late or you know there is a big risk of that happening, you get more defensive in your investments; you don’t dare as much. For us, there is already an inherent uncertainty in the order book; we may have an order log of only a few months, and we depend on stable cash flow,” Jacobson Hosk said.

The Almedalen Week is the largest political event in Sweden. Political parties, the government, members of parliament, public authorities, organisations and companies meet in informal settings such as seminars and meetings to discuss and debate current social issues. All the events are also open to the general public. The event is held in the medieval town of Visby, on the island of Gotland.

In 2013, the EU late payment directive was implemented with the aim of shortening payment times and strengthening payment morale in the European Union. Little progress has been seen however, and there are frequent calls for a mandatory, non-negotiable maximum payment period. Yet most of the concerned parties do not see that as a desirable way forward – including entrepreneur Måns Jacobson Hosk.

“I would not see that as a solution. We need some flexibility and a longer period should be our choice, like we have with a smaller client that we have at the moment who is going through a transformational period. We are doing interesting work with them and we are happy to extend the payment period in order to give them a hand,” he explained.

Even though SMEs typically are well aware that some clients are late payers, relatively few use tools such as factoring or credit insurance - in Sweden or elsewhere in Europe. The reason is the often delicate customer relationship.

“Too often you refrain from taking action or being persistent enough because of fear of damaging that crucial relationship, and things like factoring are still associated with companies in trouble. If you use it you worry that others may perceive your company as being in trouble,” says Jacobson Hosk.