Late Payments

Late Payments - status overview


In October, a new study on the impact of the regulation on Late Payments and cash flow was published to estimate the impact of the Late Payment Directive on firms’ performance (LPD-B2B). Results indicate that the LPD has been associated with higher cash flow in firms that were experiencing longer time to collect their credits in the past.


Moreover, this study documents that a significant positive difference between more and less exposed firms is also found in the levels of sales, again four years after the introduction of the directive.


On October 10th, the Late Payment expert group published the minutes of its 12th meeting, announcing the Directive revision in Q3 2023.


On October 18th, the Commission announced its plans for 2023, including the revision of the Late Payments Directive.


FEBIS participation in the “Study on building a responsible payment culture in the EU


This study, carried out during 2021 and published in July 2022 endorses FEBIS and its members for:

  • An active involvement in the creation of a European Late Payment Observatory
  • Fostering the Use of Credit Information and Credit Management Tools

The Report has been submitted to the European Commission - Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) by a  grouping of consulting firms and research institutions led by Economisti Associati Srl and comprising Milieu Consulting, Nomisma, and CRIF.


FEBIS was contacted by the consultants and held several interviews to exchange insights. Besides of FEBIS contributions, some of its members have also participated individually.


The whole study is of our interest but especially the chapters on the European observatory and the use of credit information.


The summary below is an extract of the Executive Summary and only focuses on the Observatory and use of credit information.


"The theme of payment behaviour has attracted considerable attention from decision makers.


The purpose of the study is to collect evidence and provide inputs on a series of possible actions aimed at fostering the effectiveness of the Late Payment Directive (LPD). The work was articulated in 6 thematic areas, dealing respectively with:

  • identifying the conditions for the creation of an EU observatory on payment behaviour;
  • facilitating the uptake of financial tools addressing the issues originated by poor payment behaviour and fostering the use of e-invoicing;
  • facilitating access to credit information on prospective clients.
  • implementing synergies between public procurement and prompt payment objectives;
  • fostering the use of Alternative Dispute Resolution tools to settle payment delays disputes and
  • enhancing SMEs’ credit management capabilities.

The study relied on a combination of desk work and interactions with stakeholders, including:  the review of over 250 documentary sources and some 150 websites; interviews with representatives of more than 100 entities (Member States authorities, business associations & professional groupings, enterprises, academicians, etc.); two targeted consultations with ADR professionals and public procurement authorities, and a consultation with some 700 SMEs, implemented through the Enterprise Europe Network.


Key Results


1. Creation of an EU Observatory on Payment Behaviour


There is currently a lack of comprehensive analysis of payment behaviour across the EU27.


Information on payment behaviour can be found in a variety of reports and statistics published by commercial providers of payment-related services, business associations and selected public entities. While these sources do provide useful insights, they are not always easy to retrieve, they display vastly different levels of representativeness and accuracy, and the use of different data Study on Building a responsible payment culture in the EU: Improving the effectiveness of the Late Payment formats raises comparability issues. Accordingly, the 2020 SME Strategy identified the need for setting up an EU Observatory on payment delays to support a more effective enforcement of the LPD.


The future EU Observatory is expected to fulfil 3 functions, namely: the setting up and management of a database of indicators on payment behaviour; the collection and systematisation of documents on qualitative aspects not captured by indicators (e.g. new legislative initiatives); and the carrying out of analytical and information dissemination activities, with the publication of reports and the implementation of workshops/webinars on specific topics. The database will play a central role. It is recommended that the database should consist of a set of 30 ‘key’ indicators (average payment times to suppliers, share of clients paying late, frequency of certain unfair payment practices, etc.), complemented by another 63 indicators on specific aspects (impact of the COVID pandemic, motivations for accepting unusual payment conditions, etc.).


Information extracted from the database will provide the main information base for the preparation of an annual report providing an overview of developments in payment behaviour across the EU and for thematic reports on specific aspects. Workshops and webinars are intended to disseminate information on the EU Observatory’s activities and to stimulate dialogue on selected themes (e.g. the effects of voluntary prompt payment agreements, the relationship between late payments and bankruptcies, etc.).


The EU Observatory is expected to interact with a wide range of stakeholders (national authorities, business associations, entities producing reports on payment behaviour), which will be part of a Stakeholders’ Forum. Stakeholders are expected to contribute their views and suggestions on relevant topics. However, since the EU Observatory will rely only on existing (and usually publicly available) information, participation will not entail any financial or administrative burden for stakeholders. The future EU Observatory will also take into account the experience gained with other similar structures, notably the ‘Observatoire des délais de paiement’, which has been run for many years by the Banque de France, and with other thematic observatories established by the Commission, such as the European Observatory for Clusters and Industrial Change and the European Construction Sector Observatory, both sponsored and financed by DG GROW.


2. Fostering the Use of Credit Information and Credit Management Tools


The risk of late payments can be mitigated through an effective management of trade credit, i.e. the portion of sales for a deferred payment is granted. This can be achieved using credit information, which allows to assess the creditworthiness of clients, and credit management tools, intended to allow a good control on the whole process of granting trade credit, from the setting of payment terms to the measures to be adopted for the recovery of overdue payments.


European countries can count on a well-established credit information industry, including several players active internationally (the Dun&Bradstreet network, Creditreform, Creditsafe, Experian, etc.). Services are available in a variety of formats, from simple ‘credit reports’, focusing on the financial health of a specific enterprise, to access to ‘online platforms’, providing in virtually real time a comprehensive view of the whole client portfolio, with data on historical payment behaviour, detailed financial accounts, particulars on owners/managers, etc. The number of users is substantial, estimated at some 350,000 – 400,000. However, due to limited awareness and cost considerations (the cost for accessing an ‘online platform’ may be in the € 3,000-5,000 range), credit information services are not intensively used by micro/small businesses.


The setting up of full-fledged credit management systems is only possible in relatively large enterprises (say, above € 50 million turnover). Training in credit management is offered by credit management associations and some commercial providers, but courses are mainly intended to Study on Building a responsible payment culture in the EU: Improving the effectiveness of the Late Payment provide the required qualifications to professional credit managers, and because of their cost and duration often they are not suitable for smaller businesses. There are some initiatives specifically aimed at SMEs, but their reach appears limited (e.g. 50-60 participants/year for an initiative of the French credit management association in collaboration with chambers of commerce). As a result, credit management tools are still scarcely used by smaller businesses.


A more widespread utilisation of credit information services and credit management tools could have a major impact, reducing the risk of late payments (allowing for the selection of trustworthy clients and/or the negotiation of more favourable contractual terms) and, especially, of non-payment. For instance, a leading provider of credit information services estimated that businesses making use of their services on average achieved a 3% reduction in payment times from customers, thanks to a decline in the number of days of sale outstanding. An even greater impact can be achieved when credit information is accompanied by the deployment credit management tools (e.g. a 37% reduction in unpaid invoices over a period on just 12 months in the case of French construction materials company)."




FEBIS has an ongoing working group on “Late Payments”, which objective is to increase and share the knowledge on this topic.

With several members already involved, the group has been working to update the situation in each country, not only on legal aspects, but also on the best practices and the impact of late payments in the economy. 


If you are interested in joining (or know any colleague, who might be), please contact us via secretariat@febis.org



Source: FEBIS

(with references to documents hyperlinked in this article)

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