Wednesday, 13 May 2009

EU Public Sector Pays Too Slowly

It's SME Week in the EU, and finance is very much on the agenda, with all sorts of chat about micro-finance and other funding.

But the fundamental problem is that SMEs don't get paid on time.

In fact, given their limited cashflow, even early payment of invoices is actually highly beneficial.

And while we've had plenty of legislation on the subject, and governments have bailed-out the banks, still the European Payment Index survey of over 5,000 European businesses reveals that the public sector takes an average of 37 days longer than the private sector to pay business invoices. So it's high time the Accounts Payable staff in public sector bodies got their act together.

Imagine! A lean public sector that pays on time!

Other, general, findings in the Intrum Justitia report include:
  • only 50% of all invoices are paid within 30 days, down from 53% last year, with 70% of respondents expecting that number to decline in the coming year.

  • 2.4% of all invoices have to be written off as bad debt, an increase of 0.4% or €20 billion on last year.

  • If all invoices were paid on time and in full, the money saved would equate to a liquidity injection of €270 billion into the European economy.
PS: The Irish government has changed its terms to pay on 15 rather than 30 days, though there is some doubt as to whether this will sound in practice.
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