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SMEs Pressured to Accept Longer Payment Terms

Small and medium-sized enterprises (SMEs) across Europe are being pressured into accepting longer payment times from other, often larger, businesses, according to a new report.

The European Payment Report from Intrum Justitia found that more than six out of ten (61%) businesses complain about being asked to accept longer payment terms than they feel comfortable with, a sharp rise from just over four out of ten last year.

The problem seems to create 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%) businesses admit they regularly pay late.

This worrying development has led to calls from businesses for tougher payment regulations. Four out of ten (38%) businesses would welcome new legislation, while three out of ten (30%) 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. However, Elzbieta Bienkowska, 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”.

The fact that there is a long way to go is borne out by figures that suggest average payment times are moving in the wrong direct. Intrum Justitia’s figures show that the average time for being paid by the public sector has increased from 36 to 41 days in just a year.

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