Payments Risks on the Rise    
Industry News
Billions of euros get missed in European businesses, money which could be used for investments, growth and jobs but is instead halted or even lost through incorrect payment practices. Each year around one billion invoices default in Europe and turn into debt collection cases.

The total amount of overdue receivables in the EU25 is as much as about €250 billion, which equals the entire GDP of a country the size of for example Austria.
The increase of European payment delay, from 2004 (15.1 days) to 2006 (16.8 days), equals itself a worth of €25 billion or just about the GDP of Luxembourg.

“The size of the problem is awesome and calls for stronger action by companies themselves and by legislators”, said Leif Hallberg, public affairs director at Intrum Justitia Group, when he presented the results from the 2006 European Payment Survey in Brussels today.

“Late payments and long delays will not help the economy grow, on the contrary. Fact is that payment habits damage business and disrupts trade between the EU’s member states and therefore hinders economic growth”, he added.
Some of the survey findings:
  • The new pan-European payments survey carried out by Intrum Justitia, Europe’s leading credit management services company, reveals that the European Payment Risk Index has again increased. Average payment duration, the effective time between an invoice is sent to the time it has been settled, was 59.2 days compared to 58.7 days in 2005 and 57.3 days in 2004. Average payment delay, time after the contracted payment date, increased to 16.8 days from 16.3 days in 2005 and 15.1 days in 2004.
  • Payment habits across Europe still show great variations between countries. Portugal, the Czech Republic and Greece are still at the bottom of the European payment ‘league’, while the best improvement is shown in the Baltic region. The Nordic countries, esp. Finland and Sweden, are still the best payers in Europe.

  • Governments are not setting a good example when it comes to paying contractors on time, thereby putting many supply companies at a large risk. In an across Europe average, consumers settled their payments at 42.5 days and corporates at 59.9 days while the public sector settled their payments only at 69.8 days.
  • An astonishing result of the payment survey, in which 6,500 European business managers participated, is that a more prompt payment by a company’s own customers will not automatically have a positive effect on the company’s own payment behaviour. From an amount of €100 in additional cash availability, as a result of more prompt payment by own customers, the company would use only €12.50 for more promptly settling the bills from its own suppliers.
  • As in previous European payment surveys, the 2006 report demonstrates that small and medium-sized enterprises (SMEs) are particularly hard hit by late payment. They are more vulnerable to variations in cash flow, they often rely on a limited number of customers, and they are frequently suppliers to large firms who are known to delay payments to a greater extent than smaller companies do.
Source: Company Press Release
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