Payment Periods in Europe - Euler Hermes

Economic Outlook n° 1182 | Special Dossier | Payment periods
Euler Hermes
The importance of payment periods
A microeconomic problem…
… and an indicator of the business climate
Order
Issuing
of invoice
60 days maximum
Period defined by the European Directive
Date Invoice d’échéance
de due la facture date
> An aggregate calculated for a country or sector that:
– gauges the fluidity of exchanges between
a country’s businesses,
– is a measure of cash flow management vitality,
– has an impact on business climate attractiveness.
Delivery
Source: Euler Hermes
Besides a sharp upturn in the volume of insolvencies,
the end-stage of business difficulties, the crisis and its
many secondary effects have brought a marked deterioration
in the quality of B2B payments in Europe.
There have been overall increases in the rate of losses
arising from bad debts, in late payments, and more
broadly in payment periods, while B2B credit is a major
mode of finance across all countries. The current economic
and financial climate, marked by a deteriorating
outlook and by increased uncertainty and greater volatility,
strengthens the need that much more to monitor
and manage the risks associated with the lengthening
of these payment periods.
Many data sources exist for measuring and comparing
payment periods, as well as several studies to analyze
developments in inter-company payment. However,
their methodologies vary in terms of the nature of the
data they employ – either using quantitative data
(from national administrative databases, institutes or
surveys), and most often on only an annual basis, or
infra-annually, or – most often – using qualitative data
resulting from samples or surveys. The methodologies
also vary in terms of the scope of their studies, either
in terms of business size (SMEs or large companies) or
time-scope under study (payment periods or only late
payments). As a result, the comparative, studies examine
fields of varying scope, with no effective harmonising
methodology. Also, these analyses are
mostly descriptive, covering sectoral matters, and
generally do not offer any quantitative forecast. Lastly,
we should note that, by its nature, it remains hard to
summarise the payment period situation for a country
or even a sector, given the wide amplitude of payment
periods from one business to another.
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Legal aspects
To put an end to the problem of late
payments, countries are mobilising.
European Union > European Directive 2011/7 of 16 February
will replace European Directive 2000/35 of 29 June. Member
States must make the changeover by 16 March at the latest. The
main measures of the Directive are:
> establishing a standard payment period of 30 days;
> setting a maximum payment period of 60 days in the absence
of any contractual stipulation setting another payment period
> introduction of penalties in the event of late payment, with
a unit indemnity of 40 euros interest charged on late payment
(reference rates plus 8%).
France > The French Law on the Modernisation of the Economy
(LME), France ▶ The French Law on the Modernisation
of the Economy (LME), introduced in 2009, imposes a maximum
payment period of 60 days, 45 days from the end of the
month beginning from date of issue of the invoice. 35 derogations
(sector agreements) have allowed businesses that otherwise
would have run into severe difficulties to benefit from more
flexible, gradual conditions. On 29 February, France's National
Assembly adopted the proposed bill concerning the simplification
of legislation, which, in particular, provides for the extension of
dispensatory payment periods.
Spain > Spain’s law 15/2010 of July 2010 established a timetable
of gradual application of these new payment periods:
> from its entry into force until 31 December, payment periods
were limited to 85 days
> from 1 January 2012 to 31 December, a maximum payment
period of 75 days
> from 1 January, payment periods limited to 60 days
Sources: Ministries of Economy, Finance and Foreign Trade, Official Journal
of the European Union
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