Late Payments Directive set to take effect

IN: Business news

Small and medium-sized enterprises (SMEs) will welcome the introduction of new measures to help reduce the burden of late payments.

undefinedFrom 16th March, EU-member states will be expected to implement the Late Payments Directive, which has been set out to put a stop to large businesses postponing the payment of their invoices.

Under the directive, public authorities will be required to pay for the goods and services they order from SMEs within 30 calendar days, extending to 60 in exceptional circumstances.

While public authorities must comply with the changes, it will be at the discretion of the SME whether or not to enforce the rules, as they may wish to enable late payments to maintain strong relations with their clients. 

As a statement from the European Commission (EC) revealed, SMEs will be allowed to claim interest for late payments and can automatically pick up a minimum fixed amount of 40 euros as compensation for payment recovery costs.

As part of the shake-up of the late payments culture, small businesses will be able to challenge "grossly unfair" terms and practices more easily before national courts, the EC said.

Meanwhile, member states have been encouraged to establish prompt payment codes of practice to dissuade large firms from failing to pay smaller businesses within a timely manner.

SMEs affected by late payments might also consider options like invoice finance to help them cope with the burden of delayed payments.

Factoring, for instance, will ensure SMEs get up to 90 per cent of the value of their approved invoices, while the credit control team at Aldermore chases up debts so the small firm can concentrate on running its business.

The Bank will also run credit checks, issue statements and provide collection services so SMEs really can feel free of the hassle of late payments that can bring down an otherwise burgeoning company. 

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