The European Payment Industry White Paper 2018 provides a sectorial overview and industry breakdowns of how late payments and non-payments impact European economies and business sectors, based on a compilation of data from 9607 companies across Europe (collected by Intrum for the European Payment Report 2018).
The findings in the report show that payment habits have varying impacts on different economies and industries. Although several surveyed sectors and countries indicate a positive trend, this report shows that late payments are still producing severe negative effects on companies.
Payment delays common
Payment delays are common in many business sectors. Looking at payment behaviours from consumers, corporate and the public sector point of view, consumers stand out as the most punctual payers to European companies. Most often, consumers pay within the payment terms they have committed to. Corporations, on the other hand, are on average 2 days late with their payments to other companies. Public sector organisations are least punctual with their payments to companies, with payments taking place on average 6 days late. When looking specifically at payments from the public sector to the “professional, scientific, technical, administration and support service activities” sector, the report show lengthy average delays of 28 days.
Faster payment would generate more employment opportunities
The result shows that faster payment from debtors would enable companies to hire more employees. Among the business sectors surveyed in Europe, on average one-fifth (20 per cent) of companies say that faster payment from debtors would either definitely or probably enable them to hire more employees. This figure is down from 23 per cent in 2017. In the mining and quarrying sector and the financial and insurance sector, we find the highest share of respondents who agree that faster payments would enable their company to hire more employees.
Pressure to accept longer payment terms
Companies are experiencing pressure to accept longer payment terms than they feel comfortable with. Close to six out of ten (59 per cent) say they have been asked to accept longer payment terms than they feel comfortable with, and 56 per cent say they have accepted these longer payment terms. In the information and communication sector, more than seven out of ten (72 per cent) of the respondents have been asked to accept uncomfortably long payment terms. That sector is closely followed by the manufacturing sector, in which the corresponding figure is 70 per cent.
Main causes of late payment
The reported main causes of late payment vary among sectors. According to the surveyed companies, the two most common causes of late payments from customers are financial difficulties of debtors and intentionally late payment. More than six out of ten (62 per cent) companies report financial difficulties of debtors as one of the main causes. Close to half (48 per cent) of the surveyed companies cite intentional late payment as the main cause of not receiving payments on time. Debtors’ financial difficulties and intentionally late payment were also ranked as the two main causes of late payment in the 2017 edition of the survey. In the information and communication sector, the most commonly listed cause is administrative inefficiency of customers, while intentional late payment is the main cause in the mining and quarrying sector.
Room for improvement in how companies apply precautions against poor payment performance
Companies can choose from a range of actions to protect themselves against poor payment performance, and the results of the survey show that the degree of precaution varies by sector. However, close to one-third (32 per cent) of the surveyed companies say they do not use any of the most common precautions against bad payment practices, such as credit checks, prepayment and debt collection. In public administration, almost half (47 per cent) of the surveyed companies say they do not use any of the most common precautions against poor payment performance.