European companies accept payment delays from their counterparties and themselves are being forced to delay payment of their debts. This is according to the findings of the European Payment Report (EPR), examining business attitudes in 29 countries.
More than one-third of asked admit that that they are increasingly paying later than they themselves would accept from their own customers and clients. More than half would like to pay their suppliers faster, but don’t believe this is feasible in the current economic climate. Reducing late payments would enable greater investment in product and expansion of services, according to 62 per cent of European companies.
The survey was conducted between November 2022 and March 2023 among managers of 10 556 small, medium and large companies from 15 economic sectors.
The situation is worst for companies in Great Britain, where 54% of respondents admit to delaying payments, while in Spain, for example, this share drops to 33%. Late payments are not just common but expected across all sectors. In the previous years the surveys showed that just a few sectors were seriously affected from the economic slowdown and late payments. High inflation, rising interest rates and labor costs make it increasingly difficult to pay on time, even companies want to, EPR said.
A total of 53% of businesses will accept longer payment terms than they are comfortable with, because they do not want to damage client and customer relationships. Construction sector (57%) are the most likely to accept it, closely followed by businesses in government and the public sector (56%) along with transport and logistics (56%). Also, almost half of the companies admitted that in the past year they have been forced to accept longer payment terms in order to avoid the risk of their clients and customers going bankrupt.
Growing numbers of small and medium enterprises are also asking for more flexibility around payment terms. Among them 39% said they would be more likely to request longer payment terms, compared to 35% of large businesses. This is likely because smaller businesses have relatively lower financial buffers and are therefore more susceptible to a difficult economic environment. In response to requests for longer payment terms, 53% of businesses admitted they would accept this from large companies but are more reluctant to extend the same courtesy to small and medium businesses.
Earlier research of EPR showed that European companies are spending an average of 74 working days every year, chasing late payments. This cost EUR 74 billion to the economy. The report’s authors say that late payments affect the ability for long-term investments and sustainable growth, even the opportunity to pay the staff on time.
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