Public authorities must pay their bills within 30 days and companies within 60 days, according to a new European Union Directive that has been approved by the European Parliament. Organisations that do not pay invoices within those deadlines will face set penalties and punitive interest rates that they cannot change regardless …
And a good thing it is too
I personally know two people who have had enormous issues in getting paid from government organizations.
One of the two even folded his company because of that. The other, seeing just how hard it was to get one's money from a government office, decided to only work with individuals and other companies.
I'm not sure this law will change their point of view on the question, but I do hope that it will prevent other mishaps of this kind.
Interesting fact for you...
Most (80% I think) of businesses that fail fail due to late payment rather than lack of sales or turnover.
I think you'll find they fail because of a lack of sustained availability of cash. It's true that this MAY be the result of late payment from the company's debtors but it's also often the result of running a business model with a negative cashflow combined with poor cashflow management and over-stretching their resources resulting in them not being able to deal with unexpected situations. They definitely aren't the same thing.
I hold my hands up
I was over simplfying for the sake of makeing a point, that late payment dose have a real cost, which many companys don't realise, and something the law and government should help with, unlike running the company in a bad way.
So every small company that is working for an IBM (The usual "screw the small guys" scenario) will, from now on just have to sign a contract provided by the big boys that "expressly agrees" for a longer payment period and be told that "'it is not grossly unfair' or we can find someone else"
Then the only recourse the small boys have is burning bridges by going to court.
....the EU proving UK IP are a bunch of twats.
Keep up the good work.
Nothing can stop a company never buying anything from your firm again if you get them prosecuted under this law or the word getting round to other potential customers...
I ask my customers to pay within 30 days, the operative word here being "within" Do they? do they hell, Endless chasing of accounts departments that are utterly divorced from the rest of their organisation. Naturally you can't start sticking on admin fees and interest, as that is just a recipe to lose business. It should have been 30 days across the board.
I really should ask them to kiss me first. I prefer a kiss before being screwed.
Paris? She isn't fussy
Dell will have to screw in their 65-90 payment terms.
Seriously, they helped contribute to my company falling under. Their payment only cleared TWO MONTHS after the company closed up shop. It could have allowed us more time to secure another contract especially since the banks stopped lending.
Roll out the Euro Sceptics
I love reading their comments like.... 'Leave the British Banger alone'
Yet another good law from Europe. IMHO
but I do love the Federal SuperState taking away our sovereignty comments.
I quite like Europe. The EU is not Europe. I have also never exclaimed "save the British X" about anything because that's a distraction from the central issue of the reduction of the national right to self-determination.
So, let me explain this in simple terms. Sovereignty means having the ability to set your own laws, customs, and policies, raises taxes and interact with the world as you see fit. Under the EU's principle of subsidiarity, now that the EU has legislated in this particular area of law (contract law) we no longer have the right to initiate our own legislation in that same area. In other words, we are no longer sovereign in that area. That is what the sovereignty argument comes down to; we no longer have the right, under the rule of the EU, to set policy and make law on this subject, and consequently we are no longer sovereign in that subject.
If you think that's fine then great but, nevertheless, our sovereignty has been reduced by the actions of the EU. In fact now, under the lisbon treaty, we have none. The ultimate definition of sovereignty is the ability to set foreign policy, which we no longer have - that role is now taken by the EU. Without that ability we are not a nation-state, just as Wales and Scotland are not sovereign states but merely substates or administrative states within the United Kingdom.
Was that easy enough to understand? Again, if you think this is fine and like this idea then you are more than welcome to carry on thinking that. It is still a marginally free country (despite the efforts of Brown and Blair) but I feel it would be more intellectually honest to say that you agree with this idea of transferring sovereignty to the EU than trying to pretend it isn't happening, because it is happening.
On An Understanding Of Sovereignty
"If you think that's fine then great but, nevertheless, our sovereignty has been reduced by the actions of the EU. In fact now, under the lisbon treaty, we have none."
Later on, you claim that sovereignty has merely been transferred, from one government to another. Reduced or transferred, which is it?
In truth, the sovereignty of the UK Government has been reduced, but that is not "our" sovereignty is it? You might identify with the current bunch of self-serving cock-wobbles, but I don't. And this EU directive seeks to give me greater sovereignty over my own life.
Skepticism. It requires a little thought now and then.
If Sovereignty is the ability to implement laws without any consideration of your electorate's wishes or needs.... then yes I would happily kiss it goodbye.
Seemingly Europe or The EU has done more to defend the UK Electorate (and as this example shows our Businesses) than our own Government have.
Identify with that lot?
Hardly. They represent me not one bit.
However yes, it is our sovereignty as a nation that is being reduced by transfer to a foreign government. This is not a contradiction. Sovereignty is a zero-sum game; either you have it or you do not. When it's transferred, one party loses and another gains. The fact that some of this foreign government's actions appear at first glance to benefit us as individuals doesn't mean much when the majority of its actions cost us both individually and as a collective. And yes, the same could be said of our own numpties but we can change our numpties, engage in the bloodless revolution of an election and have a new set of numpties who might be more tractable. We still have the right to do that, but those numpties we choose no longer have the power to do much because so much of that power - our authority, that they mere wield on our behalf - was handed over to a foreign government that we did not choose to represent us, and over which we have no control. That is a reduction of *personal* sovereignty.
We can't change the numpties higher up the food chain - they are immune from our collective will. And the EU, because it is immune from our will, is used by our own numpties as a means to bypass that same will in cases where it cannot convince us to go along with it, through quiet words with the ministers of other countries, reaching a consensus amongst themselves about the way to go, without ever consulting the people they claim to represent and always acting to further their own interests at our expense.
You seem to think that my argument is in favour of our lot against that lot, when it's neither. I'm against both, because they are all in it together when it's all said and done, regardless of the colour tie they have or what accent they speak with. They don't act for us, they don't represent us, they do not do a damn thing to benefit us except by accident.
You think this directive favours the little guy? It just gives multinationals another stick to beat SMEs and sole traders with, because a multinational can absorb the costs of non-compliance with the law (which carries no criminal penalty), whilst an SME can't afford to bring them to justice, and an SME can't afford to fend off a multinational bringing the full weight of this new law against it. The same as with every regulation, it favours the large over the small. Any benefit we as individuals might glean from this is mere accident.
(And yes, I do like saying numptie. Can you tell?)
EU =/= foreign
Where on earth do you get the idea that your personal sovereignty has changed at all?
The EU isn't a foreign government - you're a European citizen and have exactly the same rights over it as every other European citizen. Sure, it would be nice if the elections were direct - ie if the European Parliament had more influence and people appointed by the member-state governments had less (whether they be commissioners or "national veto"-wielders in the council), but it's still the case that the EU is a representative government that a majority of sufficiently-determined EU citizens could force to change.
If 51% of EU citizens (ie 175m people) chose a single issue that they were determined to change in Europe, and in both national and EU elections all of them voted for parties that were committed to that issue, then those parties would have a majority to implement it after one cycle of elections (5 years). Precisely the same could be said for a majority of UK citizens changing a UK policy.
Of course, it would be a lot better if we could change EU policy by kicking the numpties out and replacing them with different numpties in the EU election. So every time someone proposes getting rid of a national veto, remember to support it, as that makes it easier for citizens to have power and not national ministers.
What about employee remuneration?
Does this also cover companies paying their employees? Where I live, Bulgaria, it is not uncommon for employees not to be paid their full contractual wage for months. This is especially trrue for state employees.
The other thing to ask is: how do I, as an SME, get this law enforced without having to resort to lawyers costs way in excess of what I am owed?
It'll make no diffrence to the UK
As we already have statutory interest of.... 8% above base rate...
.gov and IOD
A good few years ago (thatchers reign?) an IBM? beancounter at the IOD took the stage and proudly announced he had saved millions by paying very very late. Many SMEs went bankrupt and he said he managed to settle debts with the administrtors for pennies on the pound.
It caused a ruckus when it his the papers but he got a standing ovation. That mentatlity still rules.
Also any small business with a relationship with a large company will not complain when payment is late or the big company decides to unilaterally change terms as they usually rely upon the contact.
The problem with this any any other law is that it costs MONEY to take action against the big boys but they have lawyers on staff so can afford to let a case drag through the courts for years.
Doing work for the gov or NHS is even worse than the private sector - they can evade a debt sinmply by renaming themselves - also they can safely ignore legal obligations and know as they are not "directors" they are not liable for such "errors".
The reality is that nothing has changed and the legislation is toothless.
It shouldent cost to much
As long as your debt is less than £5k. You can take it through the small claims court. Its an easy form and a nominal fee. As long as you keep all of the paperwork well filed it is a relitivly simple process, and it is not very expensive at all (About £50 from memory).
The fast track, for up to £15k, is not much more complex, and the maximum cost is only 10% of the debt.
If you have more than that checking with a lawyer would be a good idea any way, due to the risk of loosing that much money through a simple mistake, without even thinking about the costs.
Well if the cost is your next contract
then that maybe too much.
Court is all well and good but it does have a habit of souring a Business relationship.
But I was just replying to "The problem with this any any other law is that it costs MONEY to take action against the big boys but they have lawyers on staff so can afford to let a case drag through the courts for years." which is un-true.
However many small companies need to think wether some contracts are worth it. Also, to many small companies are frightend of chasing debts in fear of upsetting the customer, who, most likely, will not even notice. The AP will know about it but the buyers won't.
Debt often gets paid on the issue of court forms and never go to court, and it often has no effect on the relationship.
Does this mean...
That big companies who have 90 day payment terms will no longer be able to hold off payment for so long?
With the loophole still in there nothing will change.
The cheque is in the post
In my experience the bigger the organisation the slower they are in paying, so this appears to be good news.
Of course how our government implements this directive is another matter.
For the present I will be continue to add 6% to the total and offer a 5% discount if the invoice is paid within 30 days. This does seem to focus the, so called, mind of most beancounters.
Italian payment terms, anyone?
Here in Italy late payments are a big problem. Everyone in the business market always tries to negotiate long payment terms (90-120-180 days) and then quite always does not pay in a timely manner. I, as a consultant, usually get paid at least 30 days after the due date, sometimes more than one year after. This late payment policy gives the debtors power over the creditors, obviously. "If you don't work for me anymore, I will not pay the bazillion euros that I owe you".
Now it would be nice if this law could be applied to every business, not just to payments that go from government offices to private business.
Also, if at some point in time everyone is forced to pay (and get paid) on time, half of the big businesses in Italy (and all of the public-owned companies) will go bankrupt at the exact time the law is enforced.
But, since I see a paragraph that says: "Contracts will not be able to extend that period beyond 60 days "unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor", according to the new directive.", I suppose that nothing will actually happen. Contracts will be renegotiated, and payment terms will remain the same.
" "Contracts will not be able to extend that period beyond 60 days "unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor", according to the new directive.", I suppose that nothing will actually happen. Contracts will be renegotiated, and payment terms will remain the same."
Only if you agree to the new terms. Unless you enjoy volunteer work, there is no point working for nothing. If a company doesn't have the cashflow to pay in 30 days, they are even less likely to be able to pay later.
This is the critical flaw in the wording
"Only if you agree to the new terms."
Bigger companies will basically state, you agree to these terms or we go somewhere else
30/60 days from when ?
''You shall deliver bananas for a 6 month period, after which the contract becomes fulfilled'' -- so payment becomes due 6 months & 60 days after delivery of the first banana.
Getting the ''from when'' right will be the difficult bit.
After date of invoice
is the normal one. The due from date should be in the contract.
Is this valid in the UK/under UK law too?
I know a few firms, with very good people, who are having to take pay cuts or not pay themselves in order to meet debts whist waiting for their customer payments.
Its really not fair on them.
It will be in two years
But for now you can still charge 8% over base rate as statutory interest, and if things have got that bad I'd be looking at court action to recover the debts.
From the 1st of November
This for of EU directive still has to be transferred into national law by national legislatures before it becomes law within member states. Until then, no, and it is likely that a lot of companies are attempting to re-arrange contracts in order to get one final run of long payment terms before the date comes up.
Extra €180 billion ??
"result in an extra €180 billion being "available to businesses"."
So where does this extra €180 billion come from? Surely if it from businesses to another, then also 180€ billion has been lost by the paying businesses? So this new law also results in the loss of 180€ to businesses? Doesn't sound so good now does it.
However, ignoring the complete spin, this is an excellent law, as long as there is a simple, quick and cheep way to use it.
""unless otherwise expressly agreed in the contract"
Well, there's the problem. To be effective, any late-payment legislation needs to explicitly state that contract terms demanding later payment are unlawful.
It's time that legislators understood that "agreements" are never actually agreements, they are always *impositions* from a dominant party that imposes its will on the weaker party and the weaker party has no choice but to "agree" to it because all the competitors are likely to have equally unfair terms as long as the law allows unnecessary loopholes.
How's that work cross border then?
I expect .gov.uk will have a bit department tasked with punching .co.uk in the groin if we don't pay our creditors sharpish, while doing absolutely hee-haw to help us collect on our debts from the rest of .co.eu
That's not cynicism talking, it's experience.
only way I can see this working for the little guy is if you can make a claim anomalously . Then the gov audits the books of the offending party. Then levy a %15 penitentially thats paid to the people that were paid late. Then a %15 fine that goes to the gov. Make it more expensive to pay late then to pay on time .
Finally the EU coming up with a useful directive. Could be an end to large companies using smaller suppliers as an interest-free credit line, could make the world a better place - well the EU at least...
Don't see how it applies here
Penalties don't work under English law, they are unenforceable.
Could help exporters to the EU though...
I don't know if this is true but I was under the impression that Costco and the like make much of their money on credit interest with their suppliers on long payment terms, which explains why their prices are so low.
If this is true, surely this is going to impact on their business model in a big way.
We always got paid late: 2 months after invoice (and only paying the 15 day amount, not the 30 day amount).
But we worked it out by always paying our rent and expenses 2 months in arrears.
Which is exactly how it works in Italy
Everyone pays late, and the sand castle still manages to stand. As soon as someone pays a little too late, everything crashes down with a domino effect, leaving the really big ones standing, after having crushed the small ones. Banks feast on the remains of the bankrupt SMEs, and very rich people survive or become even richer, while the others... well, screw the others.
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