The European Ombudsman has kicked off an investigation into the European Commission's habit of not paying its suppliers in a timely manner. P Nikiforos Diamandouros's investigation into the Commission's tendency to bend the cash/time continuum comes as the Commission continues its own efforts to support European firms through …
Having been involved in a number of EU projects...
... I would advise any SME to stay well clear unless they have a large and generous partner willing to underwrite their cashflow until the EU pays up. In the projects in which I've been involved, I've rarely experienced a payment arrive on time and even where the contracts make provision for interest on late payment, I've never known interest to be paid...
Big company management learns this during MBA education
It's called free cash. The idea is that any company that allows you to delay payments is effectively giving you a free loan. The company thus folding is even better because that saves even more - recovery never aims for more than a percentage of what was originally owed. It's OK to lose a small company, plenty of new victims to choose from (I kid you not).
This is in principle quite simply blackmail. The small company has to choose between being yet another victim (because companies who do this do this as habit - aka 'policy') or losing a customer because they take the recovery action they are entitled to. The lesson is that you make it very clear from the day you take on a contract that the stages are (1) discount for paying early, (2) payment in full when due (3) immediate legal recovery wit interest and costs when late - and that this is simply policy, nothing personal. However, don't forget lesson 1 and 2: (1) everything is negotiable if both sides win and (2) NEVER threaten or warn without following it up or you'll look toothless and will be taken for a ride. It's very hard to recover from that position.
I have worked for a large US insurer who came to the UK 5 years ago, and they were terrible - leaving them was the highlight of that year because I couldn't believe management could be that sickeningly devoid of ethics. OTOH, I also worked for outfits in two other countries who were scrupulously correct - one to the point of factoring for their contractors - so it CAN be done better.
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