Rotterdam, April 16, 2013 - The average time Dutch companies take to pay their bills has improved over the past six years. This time went from thirteen days late in 2006, down to nine days late in 2012. These are the new figures from Dun & Bradstreet (D&B). This puts the Netherlands in second place, behind Germany, in terms of European payment behaviour. This indicates that companies have adapted to operating financially in the recession and continue to strive to maintain their cash flow.
Good payment behavior of companies is a very relevant topic for companies at a time when it is difficult to obtain outside financing. D&B has therefore examined data for nine European markets over the past six years. These provide insight into the impact of customer payment behavior on companies of different sizes. D&B collects millions of payment data every month to develop payment scores. These indicate how quickly companies pay their bills and provide insights that can protect against payment risks.
Data from D&B shows that Dutch companies exceed payment terms by an average of nine days. This is three days more than Germany, the country with the shortest average payment term of the nine European countries surveyed. In Portugal, on the other hand, companies are exceeding payment terms by an average of thirteen days.
There are many factors that influence the payment behavior of companies, such as pressures from the macroeconomy or the management culture within different sectors. For example, the public sector in the Netherlands exceeds the payment term by an average of 11 days, while for the agricultural sector it is only 8 days. In general, payment behavior within all Dutch sectors has improved over the past six years.
D&B's data points to the potential impact of the new EU Payments Directive that came into force this month. This directive lays the legal groundwork for suppliers to reduce risk and protect cash flow at a time when - due to the difficult economic climate - this is more important than ever. The planned legislation will make it easier for companies to enforce payment. For example, debtors will be forced to pay statutory interest if they fail to meet the 60-day payment deadline for businesses and 30 days for government agencies. In addition to protection, the new directive also brings new risks, as companies that are struggling financially may be held liable for interest payments.
Corinne Saunders, President Dun and Bradstreet Europe & Worldwide Network said, "Payment behavior provides good insight into a company's business and changes in payment behavior are one of the first signs of financial difficulties or possible bankruptcy. We applaud the intent of the new Payments Directive which should lead to faster payments and improved cash flow for most companies and thus reduce the likelihood of insolvency. It is unlikely to lead to an increase in disputes, but it will encourage businesses to take a fresh look and focus at payment behavior and terms of themselves and their customers. Furthermore, this reform will also put pressure on large companies in sectors where payment terms were often used as a measure to protect margins, something that too often led to smaller suppliers coming under increased pressure."
D&B recommends the following three key steps for companies to effectively manage customer payments:
Always keep a close eye on payments to improve cash flow. This is extremely important in tough economic times when credit remains limited.
Actively assess the payment behavior of all customers to determine if there are opportunities to reduce risk by taking proactive action on late payments or by including stricter or new terms in contracts.
In case of export, make use of existing information on payment behavior abroad. This way, payment terms for new customers can be adjusted accordingly and the company can protect itself against unnecessary risk.