EU Supplier Payments Worsen, While Australia Launches Voluntary Payment Code

The U.K. isn’t the only market making moves against late suppler payments: both Europe and Australia are turning their attention toward the issue.

Reports Monday (May 29) said worsening late supplier payment practices in Europe are a “reality check” for investors in an otherwise strong economic market. New data from the 2017 European Payment Report, released by Intrum Justitia AB, found that 61 percent of SMEs surveyed said they have been asked to accept longer payment terms than they feel comfortable with by their corporate customers.

That’s a 15 percent jump from last year.

Intrum Justitia Chief Executive Officer Mikael Ericson told Bloomberg News that the findings are “a growing concern.”

“This clearly significantly affects both growth and investments in European companies,” he said.

The European Union’s reaction to late supplier payments has been muted compared to regulators in other markets like the U.K. In 2011, the EU launched the Late Payment Directive, but a “deteriorating payment culture,” as the Intrum Justitia report described, has some companies calling for a tougher response.

The data was released the same day Australia launched the Supplier Payment Code, its own version of the U.K.’s Prompt Payment Code, a voluntary agreement for businesses to pay their small suppliers on time.

Thirty-two corporations have signed the agreement so far, including Coca-Cola, Coles, Woolworths and Telstra. The Business Council of Australia, which created the Code, is reportedly looking to avoid a regulatory effort to crack down on late payments.

“This is about getting a behavior change, not getting a piece of law in place,” said BCA Chief Jennifer Westacott. “It’s something that has come from the companies themselves wanting to get ahead of this sense of frustration of small business with payment terms.”

According to the BCA, the code could, in certain cases, lead to small suppliers being paid twice as fast as they are now and could usher in “a new age of cooperation and mutual respect between businesses — big and small,” it said.

But critics argue that without a way to enforce any voluntary promises of faster supplier payments, the Code could be ineffective. The nation’s Small Business and Family Ombudsman has taken greater notice of delayed supplier payments in recent months, launching an inquiry into the matter last moth.