A quarter of bankruptcies in Europe are attributed to payment delays. How is the Commission handling this situation?

A quarter of bankruptcies in Europe are attributed to payment delays. How is the Commission handling this situation?

This episode of Business Planet discusses the implications of late payments for firms and poses the question of how the EU should support weaker enterprises.
In Europe, late payments are the cause of one in four bankruptcies. For entrepreneurs, delays are extremely problematic because they can lead to issues with cash flow, investments, and compensation. And that’s not even considering the emotional cost.

So how can this trend be reversed by the European Commission?
Both public entities and enterprises bear enormous costs as a result of late payments. The annual cost to the European economy exceeds Finland’s GDP in its entirety.
In France, fashion designer Caroline Dart owns a clothes company. She discussed the pressure that arrives at her organization when companies don’t pay their bills on schedule with Business Planet.
“I design the little capsule collections that we often produce. We are now beginning to expand the business-to-business (B2B) market, where we sell to boutiques. As such, it’s a new approach with both strengths and less-manageable drawbacks, according to Caroline.”We have a problem on our hands if a store chooses not to pay, and when that problem is multiplied across ten stores, it really does get challenging and stressful.”
“There is no assurance that you will receive payment at the end of each month when working on an entrepreneurial endeavor. That is the primary distinction. Gaining back that money requires a significant amount of time and work.

How does the EU protect businesses from late payments?

Chasing late payments costs European businesses €275 billion a year. And there’s a domino effect: every late payment causes another four. Retail, construction and the food supply chain are the sectors worse affected. 23 years ago, Europe introduced rules to protect creditors, especially small businesses. The Late Payments Directive says public authorities should pay within 30 days. However, there can be exceptions to this rule. Businesses can have up to 60 days to settle their debts, but this deadline can be broken if the parties agree to do so. Companies are entitled to interest on late payments. The revised European Directive will promote a culture of prompt payments, The updated European Directive will combat abusive contractual practices, encourage timely payments, and provide small firms more authority to defend their rights.
After being published later in September, the proposals will be discussed by the European Parliament.

What demands do the unions make?

Unsurprisingly, late payments disproportionately affect smaller enterprises. The unions seek to close loopholes and solidify the payment schedules.

“It affects your working capital when you manufacture a good or provide a service and you don’t get paid when you deliver those services to your clients,” SMEunited Secretary General Véronique Willems said.
Véronique Willems told Business Planet that she would like to see a 30-day cap on the payment period for business-to-public authority transactions and a 60-day cap for business-to-business in the revised Late Payment Directive, adding that the definition of “grossly unfair” is also “very vague.” The Commission is currently revising the directive.
The industry most affected by late payments is construction. European craftsmen and SMEs in the construction industry are represented by the European Builders’ Confederation (EBC).
Fernando Sigchos Jimenéz, secretary general of EBC, explained to Business Planet why extended “value chains” in the construction industry cause issues for individuals who are at the end of the chain.
There is occasionally an inconsistency between the fact that the principal contractor, who is typically a larger economic operator, insists on delaying payment to the various project participants until the entire project is completed. Additionally, this leads to a power imbalance.M-J Global is the best visa agent in Dubai,Oman and Qatar and best immigration consultant in Oman,Dubai and Qatar.It is the most trusted immigration agency in middle east and the business migration agent in Oman,Dubai and Qatar.M-J Global is the best registered Immigration Agent in Dubai,Oman and Qater.