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Research released on Monday in Stockholm by one of Europe's biggest credit
management services company, Intrum Justitia, shows that annual European
companies written-off customer bad debt - - monies owed to a business but never paid
- - has
reached the record level of €312bn - - a figure exceeding the EU/IMF
financial assistance package of €273bn* granted to Greece, Ireland and
Intrum Justitia’s annual European Payment Index survey of almost 6,000
European businesses also shows a divided European economy, with large
differences between different countries.
“Talking about a single European
economy being in or on its way out of a
recession is not relevant any more. Instead we see a much more fragmented
picture, where some countries are doing better and better and others are
becoming worse and worse. Billions of euros have been poured into Greece,
Ireland and Portugal. Although we have seen a very troubling development, these
economies together only make up a little more than a third of the UK GDP. The
surging debt write-offs in the UK are a clear call for action in combating late
payments,” comments Intrum Justitia CEO, Lars Wollung.
Now in its seventh year, the survey also reveals that days to payment
continue to increase.
The EPI 2011 shows the average time
from an invoice being issued until payment is received to be 56 days for
business-to-business payments and 65 days when the public sector is to pay an
invoice, business-to-business increasing by one day and public sector with two
days compared to the previous year.
28% of all companies in Europe see late payments as a threat to survival whilst
45% see late payments prohibiting growth. In the UK 55% of companies see late
payments as a threat to survival and 65% see it as prohibiting growth. In
Germany, on the other hand, only 17% of companies see late payments as a threat
to survival and 23% see it prohibiting growth.
In October 2010, the European Parliament adopted a directive stating that
unless otherwise mentioned in a contract, the business-to-business deadline for
payments is 30 days. Member states have two years to adopt the new directive.
The Intrum Justitia EPI 2011 clearly shows that time to payment in Europe has to
decline drastically in the years to come to meet the implemented directive on
“The new European Late Payments Directive is a step forward in getting a
better payment culture in all of Europe and allowing businesses to help put
Europe on a path of solid economic recovery. However, legislation is not enough
– companies need to have better credit and cash-flow management systems.
Pre-emptive work on credit policies and credit decisions, by giving credit in a
responsible way, is essential and should be a top priority for enterprises all
over Europe,” says Lars Wollung.
On average, the public sector in Europe takes 65 days to pay its invoices.
Payments from consumers are made in 40 days.
“Governments all over Europe must also take their share of the
responsibility, since public authorities more often than not are the worst late
payers. Governments should be at the forefront in developing a sound payment
culture. One important step in this direction would be committing themselves to
fast-tracking the implementation of the new Late Payments Directive – not
waiting the full two years.
Joint efforts on late payments would be a necessary and efficient
complement to other initiatives taken to restore the European economy,”
says Lars Wollung.