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Late payments leave European SME´s in a bind

Late payments are squeezing small and middle-sized European companies and Nordic multinationals stand out when it comes to demanding laxer payment terms, according to the latest European Payment Report (EPR).

Intrum Justitia’s European Payment Report (EPR) surveys 9,440 companies across Europe about the payment behaviour and financial health of European Business. Small and mid-sized companies (SMEs) are more reliant on timely payments and are less protected against bad payments than their larger peers. On average, businesses are 5.6 days late in paying their bills, while the public sector lags by 7.2 days. In extreme cases, like with public authorities in Italy, SMEs will have to wait 48 days after due date to receive payment.

An astounding 35 percent of SMEs view late payments as a threat to their overall survival and four out of ten say it prevents them from growing.

“Getting paid late is tough for smaller companies and may cause liquidity and financing problems”, says Daniel Wiberg, chief economist at The Swedish Federation of Business Owners. “It is troublesome for the individual company but also detrimental to the overall economy, in terms of its efficiency and ability to grow and function properly. That the public sector are poor payers in most of Europe is tragic and it would be desirable to see them set a good example instead.”

In Europe as a whole, 39 percent of SMEs have been asked by multi-nationals to accept longer payment terms that they are comfortable with, and the Nordic region stands out in this regard, with 52 percent in Sweden, 58 percent in Denmark and 73 percent in Finland.

“Large multinational companies in the Nordic region are good at streamlining and cost-cutting and they pass this down the line to sub-contractors and suppliers,” says Wiberg. “One possible reason why the Nordic region stands out may be that SMEs here are often located higher up the value-chain than, for example, southern European SMEs. That means they typically have fewer clients and larger orders and sometimes rather symbiotic relations with the customers.”

Being pressured into longer payment times increases uncertainty for smaller companies in particular, and they frequently also face difficulties in securing revolving credits to patch over periods with tight liquidity.

“This could deter them from taking on that large order or from trying to make in-roads in export markets since they can’t assume that additional risk”, says Wiberg.

Among European SMEs, 34 percent say that faster payments would enable them to hire more employees and in total the EPR indicates a potential to create 7.7 million new jobs in both SMEs and large companies if invoices were paid on time.

Order free copy of EPR

Intrum Justitia gatherers data from thousands of companies in Europe on a yearly basis to gain insight in to the payment behavior and financial health of European business. The results are presented in our European Payment Report.

Please fill in your contact details to get a download link to the pdf version of the report.

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