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Billions of euros are missing in European businesses, money which could be used
for investments, growth and jobs but is instead halted or even lost through
incorrect payment practices, according to a recent study from Intrum Justitia.
Each year around one billion invoices default in Europe and turn into debt
collection cases.
The total amount of overdue receivables in the EU is as much as €250 billion,
which equals the entire GDP of a country the size of 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.
Leif Hallberg, Public Affairs Director at Intrum Justitia Group, commented: “The
size of the problem is awesome and calls for stronger action by companies
themselves and by legislators.
“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.”
European Payment Risk Index increases
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
There are still 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 not setting a good example
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.
Cash availability
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.
SMEs
As in previous European payment surveys, the 2006 report demonstrates that 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:
RedAlert
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