Mandatory payment terms in the EU
Payment Practices Barometer

Survey conclusion

The new EU legislation still needs to be approved by the full Parliament. If implemented, it is not expected to have a big impact on most companies because the proposed 30 or 60 day payment terms already fall within the terms they customarily use. Where it might help is in the minority of situations where extended payment terms and payment delays occur. This also means that we can expect continued need for outsourced credit management tools like credit insurance and collections as businesses realise that mandatory payment terms don’t mean guaranteed payment of invoices.

Despite this, if an impact is anticipated it is expected to be an increase or improvement in business practices. Those areas with the greatest expectations of improvement include in cash flow, in the ease of collecting outstanding invoices and in the efficiency of receivables management. These are all very realistic outcomes if payment terms become shorter or if buyers have fewer opportunities to hide behind local customs that are less familiar to their foreign suppliers. Essentially the hope is that standard mandatory payment terms will result in more buyers becoming better payers.

In a number of cases, the responses of businesses outside of the EU had greater expectations of an impact on their businesses. This was particularly the case of respondents from China. Chinese businesses sell a lot of products to buyers in the EU.

Adaption of the EU model when selling to EU buyers could simplify their receivables management practices and improve their efficiency and effectiveness when doing business with these customers. Realistically, this could be a common benefit within the EU as well. If Poland and Italy are now working on a common set of payment terms with the same rules and regulations in respect to the treatment and collection of late payments, it stands to reason that doing business internationally will be simplified.

Overall, while the general impression is that standard maximum payment terms in the EU will have a limited impact on business. The majority of those who expect it to influence their business are anticipating it to be a positive influence. Essentially mandatory payment terms should not be a major hardship.

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