Intrum Justitia European Payment Report 2017:
Contrary to political ambitions, a new European Payment Report from Intrum Justitia shows that small and medium-sized enterprises (SMEs) across Europe need to accept longer payment times from other, often larger, businesses.
The report reveals a staggering increase in 2017. Now more than six out of ten (61 per cent) businesses complain about being asked to accept longer payment terms than they feel comfortable with, up from just over four out of ten last year.
The problem seems to lead to a vicious circle, where businesses that receive late payments are in turn forced themselves to pay their sub-contractors late. Four out of ten (40 per cent) businesses admit they regularly pay late.
This worrying development is causing businesses to demand tougher payment regulations. Four out of ten (38 per cent) businesses would welcome new legislation, while three out of ten (30 per cent) would prefer new voluntary-based codes of conduct to establish a culture of prompt payment.
In an effort to help SMEs, the EU adopted its Late Payment Directive for commercial transactions in 2011. Elżbieta Bieńkowska, the EU Commissioner responsible for Internal Market, Industry, Entrepreneurship and SMEs, noted in a revision of the directive last August that “There is still work to do before a consistent culture of prompt payment becomes a reality.”
Intrum Justitia’s annual European Payment Report shows that there is indeed more work to be done. For 2015 and 2016, close to a half of all businesses reported that they have been asked to accept longer payment terms than they feel comfortable with. If close to half wasn’t already a high number, the new report shows that it has jumped to 61 percent of the businesses in 2017.
The illustration is supported by reports that the average time for claims to be paid have gone in the wrong direction in 2017 compared to the year before. From a political perspective, it should be of particular concern to note that the average time for being paid by the public sector has increased from 36 to 41 days in just a year.
This year, businesses were also asked about their own routines of paying bills to other businesses. Notably, four out of ten (40 per cent) businesses admitted that they regularly pay late, which means that an estimated five percent or more of their bills are paid late. Only three out of ten (28 per cent) businesses said they paid all bills on time.
To get a sense of how the businesses would like to solve the problems of a deteriorating payment culture, they were also asked about which measures on a national level they would prefer. Four out of ten (38 per cent) would prefer new legislation to combat the problems of longer payment terms, while three out of ten (30 per cent) would prefer voluntary initiatives, such as the establishment of new codes of conduct.
“I am convinced we need to do much more to introduce a new perspective on businesses’ payment routines. Prompt payments should be on the sustainability agenda. That is the only way we can consistently change the behaviours. It would help our small and medium-sized businesses a lot – leading to job creation and growing societies, says Mikael Ericson CEO & President Intrum Justitia.
For more information and downloadable content, click here: www.intrum.com/epr2017
About Intrum Justitia
Intrum Justitia is Europe’s leading Credit Management Services (CMS) group, offering comprehensive services, including purchase of receivables, designed to measurably improve clients’ cash flows and long-term profitability. Founded in 1923, Intrum Justitia has some 4,200 employees in 21 markets. Consolidated revenues amounted to SEK 6.1 billion in 2016. Intrum Justitia AB is listed on Nasdaq Stockholm since 2002. For further information, please visit www.intrum.com.
About Intrum Justitia European Payment Report
The European Payment Report 2017 is based on a survey that was conducted simultaneously in 29 European countries between January and March 2017. In this report, Intrum Justitia gathered data from 10 468 companies in Europe to gain insights in the payment behaviour and financial health of European businesses.
For further information, please contact:
Annika Billberg, Director of Group Marketing & Communications
Tel: + 46 8 546 102 03
Mobile: + 46 702 67 97 91