Combatting late payments is not an option, but a necessity

More than 80% of businesses, especially SMEs, are hit by payment delays, which hinder their growth, innovation and employment capabilities. That is why we welcome today´s adoption by the Internal Market and Consumer Protection Committee (IMCO) of the Late Payments Regulation, which aims to tackle the shortcomings of the 2011 directive, bringing a unique opportunity to enhance the payment culture and to build a better framework for a functional and transparent business environment. Renew Europe played a pivotal role to shape a balanced and adaptable regulation ensuring that payments for commercial transactions are made promptly, while providing some flexibility for targeted products categories.

Renew Europe MEP Róża THUN (Polska 2050, Poland), European Parliament’s rapporteur on the Late Payments Regulation, stated:

"Late payments are, together with the administrative burden and access to finance, the main concerns for SMEs and micro-enterprises, which account for 98% of businesses across the EU. Unreliable cash flows can render them financially vulnerable and restrict their ability to grow, affecting their resilience and innovation capacities and thereby undermining the competitiveness of the Union.

This regulation is for the benefit of all, as it addresses the historic demand from business to combat late payments, both business-to-business and between the business and public sector, while providing for the adaptability and flexibility needed in specific sectors. It is a major push towards a better payment culture in order to close a vicious circle that is very damaging to the European economy as a whole".

In depth

The endorsed report establishes clear rules for the public sector, leaving no room for interpretation concerning the 30-day payment periods for the public authorities, which are one of the worst payers. It also urges Member States to ensure greater transparency and independence of the enforcement authorities to enhance public bodies’ payment practices towards undertakings.

Regarding companies, payment of invoices must be made as well within a maximum of 30 days (either from receipt of the invoice by the debtor or from delivery of the product). However, some flexibility (up to 60 calendar days) is foreseen, if the parties, in the interest of their contractual freedom, so agree.

Moreover, the adopted report includes a payment period of up to 120 days for specific products categories that, due to the nature of the sector, require somewhat longer payment and invoicing periods (namely “seasonal” and “slow-moving goods”). As we need to protect the most vulnerable players on the market, the agreement also introduces more flexibility for micro-companies, by allowing them an additional year to adjust to the new payment period framework following the entry into force of the legislation.