The impact of faster payments: crucial for SMEs

26 September 2022
by smeunited -- last modified 26 September 2022

SMEunited has been advocating the correct payment terms for decades. Late payments endanger the continuity of SME activities. The report on the impact of faster payments in B2B relations, published today by the Joint Research Centre, underlines this statement. We ask the Commission to use this momentum to immediately launch the revision of the Late Payment Directive, announced by President von der Leyen at the State of the Union address.

Numbers speak for themselves: the report indicates cash flow would increase by 66 % if payments are made within 30 days. If payments are carried out in 60 days, the increase would only be 10%. These findings are more obvious in countries where late payments are an everyday challenge for SMEs.

As SMEunited already highlighted, long payment terms can force companies to reduce employment and investment or close down altogether. The report recognises that despite the Late Payment Directive, payment terms often exceed targets, whether or not they are grossly unfair to the creditor. However, it claims that it has proven its efficiency in B2G relations: the Directive decreased the average payment term from 200 to 100 days for public authorities. While this is welcome, it goes without saying that 100 days is still too long and unacceptable for small enterprises. Public authorities should lead by example. In sectors like construction or manufacturing, 60% of payments are delayed.

The report recalls that the Directive lacks monitoring tools. The Observatory on late payments, announced in the SME Strategy, should provide more insight into the SME reality. Exploring digital tools to ensure invoices are paid on time must follow the Think Small First principle. This means we should provide the right toolbox for entrepreneurial skills development and an adapted cyber environment.

In her State of the Union address, President Von Der Leyen recalled that 1 out of 4 bankruptcies is due to late payments. This report must pave the way towards a more fair and complete Late Payment legal framework.

Indeed, the report published today fully underpins SMEuniteds' longstanding proposals to improve the Late Payment Directive in both B2B and B2G relations. President Salminen stated: "If European Institutions want to be credible to our SMEs, the Commission should immediately propose a legal initiative to be dealt with in the highest urgency to ensure that it is adopted during this mandate."

SMEunited is the association of Crafts and SMEs in Europe with around 70 member organisations from over 30 European countries. SMEunited represents national cross-sectoral Craft and SME federations, European SME branch organisations and associate members. Combined, they represent more than 12 million enterprises with around 55 million employees across Europe. SMEunited is also a recognised employers' organisation and European Social Partner. SMEunited was formally known as UEAPME.

SMEunited