COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a Regulation of the European Parliament and the Council on combating late payments in commercial transactions
Date: 2023-09-12
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: commercial transaction, contract terms, deadline for payment, goods and services, single market, small and medium-sized enterprises

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 12.9.2023  SWD(2023) 314 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Accompanying the document  Proposal for a Regulation of the European Parliament and the Council  on combating late payments in commercial transactions {COM(2023) 533 final} - {SEC(2023) 313 final} - {SWD(2023) 312 final} - {SWD(2023) 313 final}  
 
 
Table of contents * 

1 

INTRODUCTION ....................................................................................................... 8 

1.1  Political context ................................................................................................. 8 
1.2  Legal context ..................................................................................................... 9 
Implementation – state of play ........................................................................ 10 
1.3 

2 

PROBLEM DEFINITION ........................................................................................ 11 

2.1  What is the problem? ....................................................................................... 11 
Public authorities often pay late ............................................................................................ 13 
2.1.1 
Late payments affect SMEs more severely than large companies ........................................ 14 
2.1.2 
Late payment affects companies from all sectors ................................................................. 15 
2.1.3 
Late payment is a worldwide problem .................................................................................. 15 
2.1.4 
2.1.5 
Payment performance deteriorates in periods of adverse economic conditions: coronavirus-
crisis and inflation ............................................................................................................................... 16 
2.2  Consequences of late payments ....................................................................... 17 
2.3  Problem drivers ............................................................................................... 18 
2.3.1 
Insufficient framework conditions ........................................................................................ 19 
2.3.2  Market failure – imbalances in bargaining power ................................................................. 20 
Insufficient redress mechanisms ........................................................................................... 22 
2.3.3 
2.4  How likely is the problem to persist? .............................................................. 22 

3  WHY SHOULD THE EU ACT? .............................................................................. 23 

3.1  Legal basis ....................................................................................................... 23 
3.2  Subsidiarity: necessity of EU action ................................................................ 24 
3.3  Subsidiarity: added value of EU action ........................................................... 25 

4  OBJECTIVES: WHAT IS TO BE ACHIEVED? ..................................................... 25 

4.1  General objectives ........................................................................................... 25 
4.2  Specific objectives ........................................................................................... 26 
To prevent late payment from occurring ............................................................................... 26 
4.2.1 
To facilitate timely payment ................................................................................................. 27 
4.2.2 
To empower SMEs and ensure more fairness in commercial transactions ........................... 27 
4.2.3 

5  WHAT ARE THE AVAILABLE POLICY OPTIONS? .......................................... 27 

5.1  What is the baseline from which options are assessed? .................................. 27 
5.2  Description of the policy options .................................................................... 30 
Policy option 1: Prevent late payment from occurring ......................................................... 31 
5.2.1 
Policy option 2: Facilitate timely payments .......................................................................... 33 
5.2.2 
5.2.3 
Policy option 3: Strengthening redress mechanisms to ensure fair payment conditions and to 
empower SMEs ................................................................................................................................... 35 
5.3  Form of the legal act ........................................................................................ 38 
5.4  Measures discarded at an early stage ............................................................... 39 

6  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ................................. 39 

6.1  Economic impacts ........................................................................................... 40 
Policy Option 1: Fix the framework conditions to prevent late payments ............................ 40 
6.1.1 
Impacts on enterprises .................................................................................................................... 40 
Impacts on SMEs and competitiveness ............................................................................................ 46 

6.1.1.1 
6.1.1.2 

1 

 
 
6.1.2 

6.1.3 

6.1.1.3 

6.1.2.1 
6.1.2.2 
6.1.2.3 

Impact on public authorities ........................................................................................................... 47 
Policy Option 2: Foster timely payments .............................................................................. 48 
Impact on enterprises ...................................................................................................................... 48 
Impacts on SMEs and competitiveness ............................................................................................ 53 
Impacts on public authorities .......................................................................................................... 54 
Policy Option 3: Empowering SMEs and ensuring more fairness in business transactions . 55 
Impacts on enterprises .................................................................................................................... 55 
Impact on SMEs and competitiveness ............................................................................................. 57 
Impacts on public authorities .......................................................................................................... 57 
6.2  Social impacts .................................................................................................. 58 
6.3  Fundamental rights .......................................................................................... 59 
6.4  Environmental impacts .................................................................................... 59 

6.1.3.1 
6.1.3.2 
6.1.3.3 

7  HOW DO THE OPTIONS COMPARE? .................................................................. 59 

7.1  Comparison  of  options  based  on  costs  and  benefits  to  enterprises  and  public 
authorities ........................................................................................................ 59 
7.1.1 
Policy Option 1 ..................................................................................................................... 62 
7.1.2 
Policy Option 2 ..................................................................................................................... 63 
Policy Option 3 ..................................................................................................................... 63 
7.1.3 
7.2  Comparison based on effectiveness, efficiency, proportionality, coherence and 
subsidiarity ...................................................................................................... 63 
Effectiveness ......................................................................................................................... 64 
Efficiency .............................................................................................................................. 65 
Proportionality ...................................................................................................................... 65 
Coherence ............................................................................................................................. 65 
Subsidiarity ........................................................................................................................... 66 

7.2.1 
7.2.2 
7.2.3 
7.2.4 
7.2.5 

8 

PREFERRED OPTION ............................................................................................. 66 

Impact on businesses ....................................................................................... 69 
8.1 
Benefits ................................................................................................................................. 69 
8.1.1 
Costs ..................................................................................................................................... 70 
8.1.2 
8.2 
Impacts on public authorities ........................................................................... 70 
8.3  Transversal policy option related to legal choice ............................................ 71 
8.3.1  Advantages and drawbacks of a regulation ........................................................................... 71 
8.3.2  Advantages and drawbacks of a Directive ............................................................................ 72 
8.3.3  Assessment of the legal choice against effectiveness, efficiency, proportionality, coherence 
and subsidiarity ................................................................................................................................... 73 
8.4  REFIT (simplification and improved efficiency) ............................................ 73 
8.5  Application of the ‘one in, one out’ approach ................................................. 73 

9  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? ....... 74 

A.  ANNEX 1: PROCEDURAL INFORMATION ........................................................ 75 

B.  ANNEX 2: STAKEHOLDER CONSULTATION (SYNOPSIS REPORT) ............ 81 

C.  ANNEX 3: WHO IS AFFECTED AND HOW? ....................................................... 89 

D.  ANNEX 4: ANALYTICAL METHODS ................................................................ 101 

E.  ANNEX 5: COMPETITIVENESS CHECK ........................................................... 111 

F.  ANNEX  6:    30  YEARS  OF  EU  ACTION  TO  COMBAT  LATE  PAYMENTS  IN 
COMMERCIAL TRANSACTIONS ...................................................................... 113 

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G.  ANNEX 7:  EU PAYMENT OBSERVATORY ..................................................... 117 

H.  ANNEX 8: MEDIATION IN PAYMENT DISPUTES .......................................... 121 

I.  ANNEX  9:  BEST  PRACTICES  IN  ENFORCEMENT  OF  PROMPT  PAYMENT 
RULES .................................................................................................................... 125 

J.  ANNEX  10:  INDICATIVE  LIST  OF  EXAMPLES  OF  UNFAIR  PAYMENT 
PRACTICES ........................................................................................................... 130 

K.  ANNEX 11: RELEVANT CASE LAW OF THE ECJ ........................................... 134 

L.  ANNEX 12: CREDIT MANAGEMENT AND FINANCIAL LITERACY ........... 136 

M.  ANNEX 13: RATES OF STATUTORY INTERESTS .......................................... 143 

N.  ANNEX  14:  OPTIONS  DISCARDED  AT  AN  EARLIER  STAGE  (IN  DEPTH 
DESCRIPTION) ...................................................................................................... 144 

O.  ANNEX 15:  SME TEST ........................................................................................ 153 

P.  ANNEX  16:  RESULTS  OF  THE  SME  PANEL  CONSULTATION  ON  THE 
REVISION OF THE LATE PAYMENT DIRECTIVE .......................................... 170 

Q.  ANNEX 17:  MAPPING LATE PAYMENT IN THE EU ..................................... 183 

R.  ANNEX 18: PROMPT PAYMENT IN SOME EU TRADING PARTNERS ....... 190 

S.  ANNEX 19: PROBLEM DEFINITION AND THE PROBLEM TREE ................ 203 

T.  ANNEX 20: CONSEQUENCES OF LATE PAYMENT ....................................... 204 

U.  ANNEX 

(TARGETED 
  LIST  OF  BILATERAL  MEETINGS 
CONSULTATIONS) ............................................................................................... 210 

21: 

V.  ANNEX 22: DIGITAL TOOLS .............................................................................. 212 

W.  ANNEX 23:  SUPPORTING INFORMATION ..................................................... 218 

X.  ANNEX 24: MONITORING AND EVALUATION OF IMPACTS ..................... 220 

Y.  ANNEX 25: OVERVIEW OF BENEFITS AND COSTS FOR BUSINESS AND FOR 
PUBLIC AUTHORITIES ....................................................................................... 221 

Glossary of acronyms 

Acronym 

Meaning or definition 

ADR 

Alternative dispute resolution 

The right to obtain interests and compensations cannot be surrendered by the creditor and cannot be 
subject to negotiations with debtors 

Automatic 
payment 
of 
and 
interest 
compensations 

average 
hourly 
cost  

EU 
labour 

An  average  EU-wide  cost  of  man-hour  applied  under  the  OIOO  approach,  equal  to  EUR 25.70. 
Notably,  Eurostat  estimated  that  in  2022  EU-wide  average  hourly  labour  costs  at  EUR 30.50: 
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Hourly_labour_costs  

B2B 

Business-to-Business 

3 

 
 
 
Acronym 

Meaning or definition 

B2B 
comparative 
study 2018 

soft-law 

EU Commission study: Business-to-business transactions: a comparative analysis of legal measures 
vs. 
2018, 
https://publications.europa.eu/en/publication-detail/-/publication/c8b7391b-9b80-11e8-a408-
01aa75ed71a1/language-en/format-PDF/source-103408786  

instruments 

behaviour, 

improving 

payment 

for 

B2C 

Business to consumers 

Commission 
report to the EP 
and 
the 
Council 

Commission 
Study 2021 

Corporate 
Social 
Reporting 
Directive 
CSRD 

CWP 2023 

or 

D&B  payment 
survey 2022 

Commission Report to the European Parliament and to the Council on the implementation of the Late 
Payment 
https://eur-lex.europa.eu/legal-
content/EN/ALL/?uri=COM%3A2016%3A534%3AFIN  (and  the  supporting  SWD  2016  278) 
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52016SC0278  

Directive: 

(2016) 

COM 

final, 

534 

Building a responsible payment culture – improving the effectiveness of the Late Payment Directive. 
https://op.europa.eu/en/publication-detail/-/publication/cb4bc1bd-1467-11ed-8fa0-
01aa75ed71a1/language-en/format-PDF/source-search  

Directive 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending 
Regulation  (EU)  No  537/2014,  Directive  2004/109/EC,  Directive  2006/43/EC  and  Directive 
2013/34/EU, as regards corporate sustainability reporting. 

Commission Work Programme 2023, https://commission.europa.eu/strategy-documents/commission-
work-programme/commission-work-programme-2023_en 

https://www.dnb.com/en-ch/knowledge/study/payment-study-2022-download/ 

Dies ad quem  Ending day of a period or deadline 

ECJ 

European Court of Justice 

Economisti 
Study 2022  

Economisti Associati, Nomisma, Crif, Milieu : Building a responsible payment culture in the EU – 
Improving the effectiveness of the Late Payment Directive (2011/7/EU) 

ECOSOC 

European Economic and Social Committee 

EPR [….] 

European Payment Report, Intrum (different years) 

EP  Resolution 
2019 

Resolution of the European Parliament on the implementation of the Late Payment Directive, 2019, 
https://www.europarl.europa.eu/doceo/document/TA-8-2019-0042_EN.html 

Expert group 

Expert group, which informs every six months about the rate applicable to the statutory interest for 
late payments in the Member States (see Annex 13), https://ec.europa.eu/transparency/expert-groups-
register/screen/expert-groups/consult?do=groupDetail.groupDetail&groupID=2710 

post 

Ex 
evaluation 
study 2015 

Ex  post  evaluation  study  on  the  implementation  of  the  Late  Payment  Directive,  2015 
https://publications.europa.eu/en/publication-detail/-/publication/400ecc74-9a54-11e5-b3b7-
01aa75ed71a1  

F4F  Opinion 
2021 

Opinion of the Fit for Future Platform on the implementation of the Late Payment Directive, 2021, 
https://commission.europa.eu/document/download/157d837a-22a0-47fb-ac9a-
628f559d4923_en?filename=Final%20opinion%202021_SBGR2_06%20Late%20payments_fup.pdf  

4 

 
 
 
Acronym 

Meaning or definition 

G2B 

Public authorities/government to businesses (the public sector is always the debtor in the transactions 
falling under the scope of the LPD) 

Impact 
assessment 
2009 

JRC 
2018 

Study 

Impact assessment 2009 for the LPD 2011 - SEC(2009) 315 https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52009SC0315&from=EN  

Conti, M., Elia, L., Ferrara, A. and Ferraresi, M., Governments` Late Payments and Firms` Survival: 
Evidence 
Union, 
the 
https://publications.jrc.ec.europa.eu/repository/handle/JRC121059 

European 

from 

JRC 2021 

Ferrara  A.,  Ferraresi  M.  Assessing  the  economic  impact  of  faster  payments  in  B2B  commercial 
transactions. Final Report, https://publications.jrc.ec.europa.eu/repository/handle/JRC121059  

JRC 
2022 

Study 

Ferrara A., Ferraresi M. (2022), Assessing the economic impact of faster payments in B2B 
commercial transactions. https://publications.jrc.ec.europa.eu/repository/handle/JRC130205  

LPD 

Late Payment Directive (Directive 2011/7/EU) 

Mediation 
Directive 

m or micro  

M  

MS 

Directive 2008/59/EC on Mediation in Civil and Commercial matters 

A microenterprise as in Commission Recommendation concerning the definition of micro, small and 
medium-sized enterprises (2003/361/EC) 

A medium-sized company as in Commission Recommendation concerning the definition of micro, 
small and medium-sized enterprises (2003/361/EC) 

EU Member States 

OIOO 

One-in-one-out approach 

p.a. 

PC 

Plum 
Consulting 
2017 

Per year (from Latin ‘per annum’) 

Public consultation 

Plum Consulting 2017: Sweating the Small Stuff, http://plumconsulting.co.uk/sweating-small-stuff-
impact-bureaucracy-burden 

PO[number] 

Policy option – for details please refer to Table 1, Table 2 and Table 3 

Public 
procurement 
directives 
PP directives  

or 

Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public 
procurement and repealing Directive 2004/18/EC: Other Directives in the public procurement area 
are:  -  Directive  2014/25/EU  (on  public  procurement  in  the  utilities  sector).  The  EU  Public 
procurement  framework  also  includes  Directives  2014/23/EU  (on  concessions),  -  Directive 
2009/81/EC (on procurement in the defence and security sector), Directive 89/665/EEC and Directive 
92/13/EEC (Remedies Directives), Directive 2014/55/EU (on e-invoicing in public procurement). 

RSB 

Regulatory Scrutiny Board 

S or small  

A small company as in Commission Recommendation concerning the definition of micro, small and 
medium-sized enterprises (2003/361/EC) 

SAFE survey 

Survey on SMEs access to finance 

5 

 
 
 
Acronym 

Meaning or definition 

SDG  

Sustainable Development Goal 

SME panel 

A targeted SME consultation, details and results in Annex 16 

https://single-market-economy.ec.europa.eu/smes/sme-strategy/sme-performance-review_en  

SME 
Performance 
Review 

SME Strategy  COM(2020) 103, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020DC0103 

SOTEU 

State of the European Union speech 

Strategic 
foresight report 
2022 

https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A52022DC0289&qid=1658824364827 

Trade credit 

Supplier credit, takes place when a sale is not made against cash but against a deferred payment 

The  Domino 
Effect study 

2017  UK  study  ‘The  Domino  Effect:  the  impact  of  late  payments’,  https://www.sage.com/en-
gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-Research-Sage.pdf 

UTP Directive   Directive 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading 

practices in business-to-business relationships in the agricultural and food supply chain 

6 

 
 
 
Glossary of terms  

A note on terminology:  

•  Payment term is the time period set out in the contract and agreed by the two parties. It corresponds 

to the trade credit granted by the creditor to the debtor to pay off the amount due. 

•  Payment delay is the period of time starting after the due date according to the contract (payment 

term), until the payment is received by the creditor. 

•  Payment duration (or period) is the total period of time required for the payment to reach the 
creditor, i.e. from the beginning of the payment term until the payment is received (total sum of 
payment  term  and  potential  delay).  The  figure  below  visualises  the  difference  between  these 
concepts: 

Figure 1 : Payment term, payment delay, payment duration 

•  Agreed term – payment term agreed in the contract,  
•  Arbitration service 
•  Commercial  transaction  serves  to  transmit  economic  values  such  as  materials,  products,  and 
services from those who want to exchange them for another value, usually money, to those who 
need them and are willing to pay a countervalue1. The LPD defines ‘commercial transactions’ as 
transactions between undertakings or between undertakings and public authorities which lead to the 
delivery of goods or the provision of services for remuneration. 

•  Compensation refers to both compensation flat fee and compensation interest together 
•  Contract, invoice 
•  Days sales outstanding (DSO) is the average number of days it takes a company to receive payment 
and is calculated as follows: DSO= (average amount of the account receivable/revenue) * 365 days. 
Interest for late payment - means statutory interest for late payment or interest at a rate agreed upon 
between undertakings, subject to Article 7 of the LPD 

• 

•  Mediation service 
•  Legal term – payment term stemming from provisions of the law, e.g. the LPD 
•  Statutory interest for late payment – means simple interest for late payment at a rate which is equal 

to the sum of the reference rate and at least eight percentage points (LPD, Art 2 par. 6) 

•  Terms: firm, company, business, enterprise, undertaking are used interchangeably 
•  Verification procedure – a procedure by which the conformity of the goods or services with the 

contract is to be ascertained 

Annexes 

This report includes mandatory annexes (annexes 1-5), standard annexes (SME test, digital 
by default) and others in support of the main text.  

1 https://www.britannica.com/topic/commercial-transaction;  

7 

 
 
 
 
 
 
1 

INTRODUCTION  

1.1  Political context 

1. 

2. 

3. 

Reliable streams of payments are necessary for SMEs to operate, grow and invest. 
Prompt  payments  protect  small  business’  liquidity,  productivity,  and  solvency. 
They  strengthen  the  competitiveness  of  the  whole  EU  economy.  They  support 
companies  in  their  transition  towards  more  sustainable  and  digital  models  and 
strengthens  their  resilience.  Late  payment  harms  the  functioning  of  the  internal 
market, adversely affects employment and poses risks to the growth prospects of 
the EU. A culture of late payment undermines the freedom of economic initiative, 
enshrined in the EU Charter of Fundamental Rights (Article 16).  

Before  the  coronavirus  pandemic,  only  40%  of  payments2  in  commercial 
transactions were made within the agreed contractual deadline. Economic shocks 
and factors increasing uncertainty cause timeliness of payments to deteriorate. In 
first half of 2022, six out of ten companies expected the risk of late payments to 
grow in the short term due to inflation3. High interest rates, which are an indirect 
effect of inflation, support late payment4. Predictability of payments is important 
for  all  businesses.  SMEs  have  more  limited  access  to  liquidity  than  public 
authorities  or  large  businesses,  which  makes  getting  paid  on  time  vital.  Late 
payment disrupts their daily operations, negatively affects their employment and 
investment decisions, and undermines their position in supply chains.  

The  Commission  recognises  a  broad  consensus  that  the  European  model  for 
inclusive  economic  growth,  based  on  sustainable  competitiveness,  economic 
security,  trade  and  open  strategic  autonomy  and  fair  competition,  is  a  source  of 
prosperity5. In 2019, the European Parliament 6 identified several shortcomings of 
the Late Payment Directive (LPD), e.g. the lack of an absolute maximum payment 
term  in  B2B  transactions,  insufficient  remedial  measures,  and  insufficient 
enforcement mechanisms. The SME Strategy for a sustainable and digital Europe, 
calls for ensuring a ‘late-payment-free’ environment for SMEs and strengthening 
the enforcement of the LPD. In 2021, the Fit for Future platform highlighted critical 
issues in the implementation of the LPD in the F4F Opinion 2021. These findings 
mirror  the  conclusions  of  previous  assessments  carried  out  by  the  European 
Commission7 - see Annex 6. 

4. 

President  von  der  Leyen  announced  a  revision  of  the  LPD  in  the  2022  SOTEU 
speech ‘because it is simply not fair that 1 in 4 bankruptcies are due to invoices not 
being  paid  on  time.  For  millions  of  family  businesses,  [the  revision]  will  be  a 

2 B2B comparative study 2018 
3 Intrum, EPR 2022,  
4 PPMI, ‘SMEs and high inflation’, SME Performance Review, in preparation 
5 COM(2023) 168 final,  
6 EP Resolution 2019 
7 Ex-post Evaluation 2015, Commission Report to the EP and the Council, B2B Comparative study 2018 

8 

 
 
 
lifeline  in  troubled  waters’.  The  President  announced  an  SME  relief  package  as 
well. The revision of the LPD has been included in the CWP for 2023.  

1.2  Legal context 

5. 

The  LPD  was  adopted  in  2011  to  address  the  shortcomings  of  Directive 
2000/35/EC (see Annex 6). It introduced the following measures: 

1)  Obligations for payments G2B:  

a)  public authorities have to pay for goods and services within 30 days, 
b)  public entities operating in the market and carrying out economic activities, and 
public authorities in the healthcare can set payment terms not exceeding 60 days.  

2)  Obligations for payments B2B:  

a)  enterprises have to pay their invoices within 30 days. This term can be extended to 

60 days if expressly agreed and not “grossly unfair” to the creditor.  

3)  Both in B2B and G2B transactions, where a contract foresees a verification procedure 
for the acceptance of the goods or the services, it should not exceed 30 days from the 
date of the reception of the goods or services. This term can be extended (indefinitely) 
as  long  as  expressly  agreed  in  writing,  and  not  “grossly  unfair”  for  the  creditor. 
Enterprises  are  entitled  to  claim  interest  for  late  payment  and  to  obtain  a  minimum 
fixed  amount  of  EUR 40  as  a  compensation  for  recovery  costs.  They  can  claim 
reasonable compensation for all remaining recovery costs. 

4)  The minimum interest rate for late payment is 8 percentage points above the ECB’s 
reference. Public authorities are not allowed to fix a lower interest rate for late payment. 
Businesses can fix a lower rate if it is expressly agreed in the contract and not “grossly 
unfair” to the creditor. 

6. 

7. 

8. 

The LPD (recital 4) recalls all the relevant regulations to facilitate judicial claims 
of unpaid credits cross-border8.  

The LPD is closely linked to the Unfair Trading Practices in the agro-food supply 
chain  (UTP)  Directive.  The  legal  relationship  between  the  two  legal  texts  is 
explained in Recitals (17) and (18) and article 3(1) of the UTP Directive. Notably, 
the late payment prohibition in the UTP Directive constitutes a lex specialis for the 
agricultural and food sector in relation to the LPD. The prohibition of late payments 
laid down in the UTP are without prejudice to the late payments and remedies rules 
in the LPD. The late payments in the LPD are also without prejudice to the specific 
rules applicable in the agri-food sector to value-sharing agreements, payments in 
the  context  of  the  school  scheme  and  to  certain  payments  in  the  must  and  wine 
sectors.  

The Corporate Sustainability Reporting Directive (CSRD) requires large and listed 
companies  to  report  according  to  European  Sustainability  Reporting  Standards 
(ESRS) to be adopted by the Commission. It specifies that ESRS should define e.g. 
the information that companies have to report about payment practices. The recitals 

8 https://commission.europa.eu/law/cross-border-cases/procedures-simplify-cross-border-cases_en 

9 

 
 
 
 
of the CSRD indicate that such information should include the date or period for 
payment, and the rate of interest for late payment or the compensation for recovery 
costs.  

9. 

Some  of  the  public  procurement  directives  provide  for  a  direct  payment  to 
subcontractors. Art 71(3) of the directive 24/2014/EU provides for the possibility 
for  the  Member  States  to  lay  down  provisions  on  direct  payments  to  the 
subcontractor for services, supplies or works provided to the economic operator to 
whom the public contract has been awarded (the main contractor) ‘where the nature 
of the contract so allows’. 

1.3 

Implementation – state of play 

10. 

11. 

12. 

13. 

14. 

The LPD entered into force on 16 March 2011. All Member States have transposed 
the Directive. The last notification of transposing measures arrived in July 2014.  

In April 2023, there were 8 infringement procedures pending: 6 for bad application 
and 2 for non-conformity of legislation. Many of the bad application cases involve 
long payment delays to suppliers by the public authorities, particularly in the health 
sector.  Others  concern  not  respecting  the  interest  rates  and  compensation  for 
recovery costs. 

The  case  law  of  the  Court  of  Justice  concerning  the  LPD,  either  exclusively  or 
jointly  with  Directive  2000/35/EC,  includes  several  preliminary  rulings  and  one 
judgement in the framework of an ongoing infringement procedure (see Annex 11). 

The LPD’s implementation was supported by an awareness raising campaign and 
an  expert  group  (see  glossary),  which  informs  every  six  months  about  the  rate 
applicable  to  the  statutory  interest  for  late  payments  in  the  Member  States  (see 
Annex 13).  

The LPD allows Member States to introduce provisions that are more favourable 
to the creditor than those necessary to comply with the Directive. Several Member 
States9 resorted to this possibility and enacted stricter rules (see examples in Annex 
9). 

15.  While  the  Commission  did  not  carry  out  an  evaluation  before  this  impact 
assessment,  there  is  extensive  evidence  collected  throughout  the  years,  which 
constitutes  a  robust  basis  to  identify  the  problems  and  the  possible  options  to 

9 Austria, Bulgaria, Croatia, Denmark, Finland, France, Germany, Ireland, Lithuania, Poland, Spain, Sweden 
and the Netherlands. The United Kingdom excludes the extension from 30 to 60 days in payments by public 
entities in the healthcare sector, and transposed the 40 eur compensation in the form of a schedule according 
of the value of the invoice (similar to the Irish national provisions). 

10 

 
 
 
address them. Namely, the LPD was evaluated in 201510 and several of its aspects 
were assessed in 201611, 201712, 201813, 201914, 202115 and 202216 - see Annex 6. 

16. 

The initiative is expected to contribute to Sustainable Development Goals: SDG 8, 
‘decent work and economic growth’, SDG 3, ‘Ensure healthy lives and promote 
well-being for all at all ages’, SDG 4, ‘Quality education’ and SDG 9, ‘Industry, 
Innovation and Infrastructure’.  

2  PROBLEM DEFINITION 

2.1  What is the problem? 

5 out of every 10 invoices are paid late17 – SMEs are more affected than large companies 

17. 

18. 

19. 

Commercial  transactions  between  undertakings  consist  in  supplying  goods  or 
providing services in exchange of monetary payments. Every year, between 18 and 
40 billion invoices are exchanged in the EU, more than 500 every second18.  

Late  payments  are  those  payments  that  are  not  made  within  the  agreed  or  legal 
term.  In  addition  to  late  payments,  there  are  also  long  payment  terms  set  in 
contracts. The longer the period between the delivery of goods or services and the 
payment, the less likely the creditors are to consider the period as fair, as regards 
both late and long payment terms. 

Late  payments  represent  a  problem  for  the  European  economy  because  of  their 
negative  economic  and  social  consequences.  They  reduce  competitiveness, 
increase uncertainty, reduce SME participation in public procurement and harm the 
well-being of entrepreneurs. Late payments undermine productivity19 growth and 

10 Ex-post evaluation  
11 Commission Report to the EP and the Council  
12 JRC 2021  
13 B2B comparative study 2018 
14 EP Resolution 2019 
15 F4F Opinion 2021 
16 Commission Study 2021, JRC 2022 study 
17 Source: D&B payment survey 2022 
18 https://blog.summitto.com/posts/number_of_invoices/ 
19 Uncertainty and Productivity: Exploring the Links: ‘Uncertainty affects productivity through reductions 
in capital investment, which in turn lowers the trajectory of labour productivity’. 
http://www.microprod.eu/wp-content/uploads/2022/09/Uncertainty_1Sep2022.pdf  
The Domino Effect study: ‘Companies need channel their administrative resources from other potentially 
more productive uses to managing late payments.’,  
Fluctuations in Uncertainty: ‘When uncertainty is high, productive firms are less aggressive in expanding 
and unproductive firms are less aggressive in contracting. The high uncertainty makes both of them more 
cautious. This caution produces a chilling effect on the productivity-enhancing reallocation of resources 
across firms’. 
https://www.jstor.org/stable/pdf/23723489.pdf?refreqid=excelsior%3Acf14d88cfe9ae0ea753d5346751629
e2&ab_segments=&origin=&initiator=&acceptTC=1  

11 

 
 
 
fairness, both of which are key factors on which the EU is building its sustainable 
competitiveness20. In any affected company they increase working capital needs, 
drive up hassle costs and increase financing costs. They affect companies from all 
sectors21,  all  EU  Member  States22  and  they  disproportionately  severely  affect 
SMEs23. As a result, they are present in cross-border transactions, undermining the 
development  of  the  single  market  and  internationalisation  of  EU  companies.  In 
2022, average EU payment term equalled 37 days and average EU actual payment 
time stood at 50 days24. See Annex 17. 

Figure 2: Late payment problem - context, drivers, and consequences 

20 COM(2023) 168 
21 EPR 2022 
22 EPR 2022 
23 T. Nicolas, Short-term financial constraints and SMEs’ investment decision: evidence from the working 
capital channel, Small Business Economics (2021) 
24 EPR 2022, 

12 

 
 
 
 
Figure  3:  Trend  lines  for  total  payment  duration 
(average  of  B2B,  G2B  and  B2C)  and  delays  in 
payments by public authorities, in the EU-2425 

60,00

40,00

20,00

0,00

Average delay in payments - public
authorities
Total duration in days to get paid
(number of days)

20. 

‘Cash  is  king’  was  a  common  refrain 
throughout the 2008-2009 recession and 
even  more  true  during  the  recovery26. 
The  adoption  of  the  LPD  in  2011 
(transposition  in  2014)  helped  reduce 
payment  delays  from  their  high  post-
crisis  (2008-2009) 
levels  and  has 
lowered firm exit rate by 0.3 percentage 
points in sectors highly exposed to the 
public authorities, compared to  sectors 
less 
public 
authorities27. The delays rose sharply in 
2020,  likely  driven  by  the  coronavirus 
crisis,  and  have  remained  high  since 
then.  Average  payment  duration  went 
up from 37.2 days in 2019 to 56.5 days 
in 202028.  

dependent 

the 

on 

21. 

Since then, payment performance has not returned to its pre-crisis levels. In 2022, 
payment duration was higher than in 2014. 

2.1.1  Public authorities often pay late 

22. 

Public authorities should lead by example and pay their suppliers on time. The LPD 
recalls a “special responsibility” of public authorities to facilitate SME access to 
finance  and  develop  a  legal  and  business  environment  supportive  of  timely 
payments  in  commercial  transactions29.  The  importance  of  public  authorities 
paying on time is driven by the fact that every year, over 250 000 public authorities 
in  the  EU  spend  around  14%  of  GDP  (around  EUR 2  trillion  per  year)  on  the 
purchase of services,  works and supplies. And yet,  the payment  performance of 
public authorities can stand significantly below the requirements set by the LPD. 

23. 

In  Italy,  the  average  payment  period  of  the  “worst”  public  payers  exceeds  400 
days30. In Spain, local communities often pay late: in October 2022, their average 
payment  period  stood  at  53  days,  and  there  were  cases  of  payment  periods 
exceeding 300 days31. 

25  Source:  EPR  2022.  Total  duration  in  days  to  get  paid  presents  the  average  of  business-to-consumers, 
business-to-business  and  public  authorities'  transactions.  Note:  Covers  EU-27  countries  except  Cyprus, 
Luxembourg and Malta, where data is not available. 
26 ACCA and CBI (2010), Small Business Finance and the Recovery, 
http://www.accaglobal.com/content/dam/acca/ global/PDF-technical/small-business/pol-af-sbf.pdf   
27 JRC 2018 study 
28 SME Performance Review 
29 LPD, Recital 6  
30 https://www.confindustriadm.it/tempi-di-pagamento/ 
31 https://www.hacienda.gob.es/es-ES/CDI/Paginas/PeriodoMedioPago/PeriodoMedioPago.aspx 

13 

 
 
  
 
24. 

25. 

In  general,  although  late  payments  by  public  authorities  have  gone  down 
significantly since the introduction of the LPD (from 27.8 days in 2011 to 16.8 days 
in 2022) (see figure 3), they remain a significant problem. On average, payments 
by public authorities are still slightly more delayed than payments in business-to-
business transactions (16.8 days for G2B vs. 13.3 days for B2B). 

Although  public  authorities  are  already  obliged  to  pay  within  30  days  since  the 
introduction of the LPD, numerous attempts remain to circumvent the obligations 
in  place.  For  example,  common  practices  include  long  verification  procedures 
before starting the clock on 30 days requiring a waiver of the entitlement to interest 
and compensation or bans on execution of executive orders of payment issued by 
a Court. 

2.1.2  Late payments affect SMEs more severely than large companies 

26. 

27. 

28. 

Late payments are an issue for companies of all sizes32. While some studies33 point 
to comparable levels of payment terms and delays in SMEs and large companies, 
other studies show that payment behaviour of large companies differs from the one 
of smaller enterprises. The percentage of punctual payers decreases as business size 
rises34.  A  2021  study  demonstrates  that  microenterprises,  and  in  some  markets 
small companies, showed the best payment behaviour (Figure 15 in Annex 17). 

The larger the company is, the worse payment performance it is likely to exhibit35 
36.  

Large companies tend to hoard liquidity and not pass it on to the supply chain. In 
Spain, it has been reported that the massive injection of liquidity completed under 
coronavirus-crisis support led to a situation where large companies doubled their 
pre-crisis liquidity levels and did not pass it on to SMEs. At the same time, they 
slowed down their payments, leaving  EUR 82 billion of invoices unpaid outside 
the legal payment term37.  

29.  Medium  and  large  companies  are  much  more  effective  in  managing  the  cost  of 
overdue payments than small and microenterprises are. Micro companies are most 
affected by the problem of delays with 8% of their total cost resulting from late 

32 SAFE Survey, 2022 
33 EPR 2022  
34 Global Trade Credit Payments Study - CRIBIS & Dun & Bradstreet (dnb.co.uk)  
35 D&B payment survey 2022 
36 On average, 51.3% of micro-enterprises pay their invoices by the due date, while the same  is true for 
47.9% of small enterprises, 41.5% of medium-sized enterprises and only 34.5% of large enterprises. This 
effect is visible in all the EU countries analysed in the study except the Czech Republic and Slovenia. Details 
on country performance are in Annex 17. 
37 https://www.economistjurist.es/zbloque-1/el-futuro-de-200-000-pymes-y-autonomos-peligran-por-la-
alargada-sombra-de-la-morosidad/ 

14 

 
 
 
payment. The corresponding percentages in small, medium and large companies 
amount to respectively 5.5%, 3.9% and 3.3% of total costs38. 

2.1.3  Late payment affects companies from all sectors  

30. 

31. 

Late payments affect all sectors. Most business organisations responding to the PC 
are either openly against sectoral exceptions or do not mention such a consideration 
in  their  submissions.  Construction  sector  business  associations  call  for  reducing 
tolerance for long payment terms and late payment but are not asking for a sectoral 
approach. Some stakeholders representing wholesale, retail and textile industries 
have  called  for  sectoral  approaches.  The  evidence  from  the  PC  does  not  show 
unanimity  among  stakeholders  from  these  sectors  and  their  diverging  views  are 
sometimes starkly contradictory (e.g. with regards to large retailers). Findings from 
the SME panel do not confirm the need for a sectoral approach. These aspects are 
analysed in sections 6.1.1.1.1 and 6.1.1.1.2. See also Figure 15 in Annex 17. 

Construction  sector  stakeholders  report  late  payments  as  particularly  acute. 
Practices to artificially delay payment  in construction sector include disputes on 
the quality of the work or materials, extending verification procedures, or making 
administrative  payment  processes  excessively  complex39.  49%  of  SMEs  in  the 
construction  sector  reported  late  payment  problems40.  The  percentage  share  of 
payments made on time in this sector is not satisfactory anywhere in the EU, except 
for Denmark, where 91.9% payments were made on time41. The percentage share 
of payments made by the agreed deadline in 2022 ranged from 15% in Bulgaria to 
68% in Germany42.  

2.1.4  Late payment is a worldwide problem 

32. 

Late payments are a worldwide problem. In 2017, 10% of the invoices issued in 
commercial transactions around the world were estimated not to be paid on time or 
to be written-off as bad debt43, costing the global economy $1 trillion every year44. 

33.  Many  EU  trading  partners  address  late  payment  problems  with  behavioural  or 
disclosure legislation (see Annex 18). In B2B, prompt payment rules are found in 
Japan, India and Türkiye. The size of at least one of the two parties in the contract 

38 https://for.org.pl/pliki/artykuly/2628_zatoryraport.pdf  
39  Analytical  Report  on  Late  Payments  in  the  Construction  Sector,  2020,  European  Construction  Sector 
Observatory 
40 SAFE survey, 2022 
41  41  D&B  Payment  Survey,  2022  https://www.dnb.com/en-ch/knowledge/study/payment-study-2022-
download/ 
42  D&B  Payment  Survey,  2022  https://www.dnb.com/en-ch/knowledge/study/payment-study-2022-
download/ 
43 Late payments are often referred to as the “assassins” of SMEs in “How SMEs can speed up payments 
from  large  corporations”,https://www.forbes.com/sites/forbesbusinesscouncil/2020/04/30/how-smes-can-
speed-up-payments-from-large-corporations/?sh=1311bc2d405d 
44https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-
Research-Sage.pdf 

15 

 
 
 
is used to define payment terms conditions (from 30 days plus verification from the 
date of invoice to 60 days including verification from delivery date; Japan and New 
Zealand  have  rules  on  unfair  payment  practices).  Reporting  obligations  tend  to 
focus  on  where  late  payment  risks  are  higher.  UK,  USA,  Australia  have  also 
promoted  voluntary  codes  in  B2B;  their  effectiveness  remains  to  be  proven. 
Specific prompt payment B2B legislation exists for the construction and agriculture 
sector. In G2B, prompt payment rules set 30 or fewer days as payment terms, with 
shorter deadlines for payment to small companies in some countries. Construction 
is the most regulated sector, both in B2B and G2B, with strict timing of payments 
also  down  the  supply  chain.  Most  prompt  payment  rules  include  automatic 
application of interest, and compensation never appears. 

34. 

In  summary,  the  information  on  payment  practice  laws  in  non-EU  countries  is 
uneven.  Several  countries  are  in  the  process  of  considering  or  advancing  late 
payment legislation. This explains why there is little in terms of evaluation (mainly 
from  UK,  US/Canada  and  an  evaluation  in  Australia  is  ongoing).  The  reviews 
screened  point  to  the  fact  that  there  is  no  single  policy  measure  that  would 
guarantee successful reduction in payment delays, e.g. policy measures put in place 
in the US lacked an effective dispute resolution  mechanism, which significantly 
reduced their overall effectiveness.  

2.1.5  Payment  performance  deteriorates  in  periods  of  adverse  economic  conditions: 

coronavirus-crisis and inflation  

35. 

General  payment  discipline  deteriorates  in  times  of  economic  difficulties45  (see 
section 2.1). In April 2020, the French “Médiateur des Entreprises” informed that 
the  number  of  complaints  about  late  payments  they  received  in  March  2020 
increased tenfold compared to normal situation and that late payment was the first 
reason for the complaints46. In Italy, every day of delayed payment causes the need 
for  working  capital  of  small  businesses  to  increase  by  up  to  15%  or  EUR 19 

their  payments 

45 Avec la crise sanitaire de 2020 et son impact sur l’activité des entreprises, les comportements de paiement 
se  sont  rapidement  dégradés.  https://www.economie.gouv.fr/files/files/directions_services/mediateur-des-
entreprises/odp_2020.pdf?v=1637739908  
In the UK, 62% of all small businesses have experienced either an increase in late payments from customers 
result  of  COVID-19. 
frozen  completely 
(44%)  and/or  had 
https://www.fsb.org.uk/static/84f47dd3-0cbe-4339-afd147be808b02f5/Late-Again-How-the-coronavirus-
pandemic-is-impacting-payment-terms-for-small-firms.pdf 
46  NetPME,  (Coronavirus).  Médiateur  des  entreprises  :  «  Nous  sommes  submergés  par  un  tsunami  de 
https://www.netpme.fr/actualite/coronavirus-mediateur-des-entreprises-nous-
saisines 
sommes-submerges-par-un-tsunami-de-saisines/ 
Le Figaro : « les incidents de paiements multipliés par trois », 16.04.2020 
 https://www.lefigaro.fr/flash-eco/coronavirus-les-incidents-de-paiement-multiplies-par-trois-20200416 

(30%)  as  a 

20.04.2020 

», 

16 

 
 
 
billion47. In Spain, in the first 6 months of 2021, 70% of invoices were paid late48. 
See Figure 3 in section 2.3 for information on cyclicality. 

36. 

Inflation reduces the real value of debt49 and paying late means paying less. While 
inflation itself affects late payments only to a limited extent, it may have indirect 
effects as central banks take action to curb inflation by raising interest rates, which 
may negatively affect economic growth, firms’ liquidity as well as their financing 
options,  thus  affecting  late  payments,  too50.  Inflation  increases  business  risks, 
making  it  more  difficult  to  predict  input  factor  prices.  In  a  high-inflation 
environment,  enterprises  may  find  it  difficult  to  pay  their  bills  when  prices  go 
sharply up. In times of high-interest rates, paying late becomes very attractive as 
long as it does not entail paying interest.  

2.2  Consequences of late payments  

37. 

38. 

Late  payment  creates  a  domino  effect  that  leads  to  more  late  payment. 
Consequences of late payment spread along and across supply chains, industrial 
ecosystems, and the entire economy. Consequences of late payment are discussed 
in depth in Annex 20. 

Positive  consequences  of  late  payment  accrue  to  debtors.  They  include  stronger 
cash flow, and they allow the debtor to avoid going through the process of applying 
for financing. 

39. 

Negative consequences of late payment accrue to both creditors and debtors. Late 
payment: 

1)  reduces competitiveness,  

a)  increases hassle costs of chasing debtors for payment, 
b)  increases cost of financing,  

2)  increases uncertainty and the risk of running a business, 

a)  reduces investment capacity, 
b)  increases liquidity risk and the risk of bankruptcy, 
c)  reduces trust and confidence in the market, 
d)  results in jobs lost, 

3)  reduces participation of SMEs in public procurement, 
4)  produces negative societal outcomes. 

47 Il Sole 24 Ore: Coronavirus, servono 15 miliardi di liquidità nei prossimi 3 mesi, 19.03.2020  
https://www.ilsole24ore.com/art/coronavirus-servono-15-miliardi-liquidita-prossimi-3-mesi-
ADLnKTE?refresh_ce=1 
The quoted estimate was calculated based on an optimistic scenario assuming a 20-day delay after the agreed 
payment term. In practice, payment delays exceeding 100 days occured even before the COVID-19 crisis. 
48 
de 
https://cincodias.elpais.com/cincodias/2021/09/21/pyme/1632178660_252671.html 
49 
on-small-businesses 
https://www.mondu.ai/blog/effects-inflation-payment-behavior-b2b/ 
50 PPMI, ‘SMEs and high inflation’, SME Performance Review, in preparation 

https://www.icaew.com/insights/viewpoints-on-the-news/2022/oct-2022/the-impact-of-late-payments-

23.09.2021 

morosidad 

pymes”, 

Efectos 

Cinco 

Días: 

las 

en 

la 

17 

 
 
 
2.3  Problem drivers 

40. 

Parties  of  commercial  transactions  seek  to  maximise  their  financial  liquidity  at 
minimum cost and, while trade credit is a generally accepted practice, there is no 
universal agreement about which payment terms are considered fair and which are 
not.  

Figure 4: High cash reserves ratio represents a stronger motivational factor for companies managing 
their probability of default than reducing late payment51 

Late  payment  is  caused  by  horizontal 
drivers common to all sectors and applicable 
in commercial transactions.  

(e.g. 

In  LPD’s  context,  the  interpretation  and 
application  of  key  provisions  on  payment 
terms are delegated to insufficiently defined 
unfair’); 
concepts 
enforcement  of  the  law  is  insufficient 
because it can only be obtained through long 
and costly court procedures, and it is easier 
for many debtors to obtain finance through 
late payment rather than bank credit. 

‘grossly 

much more than the increase caused by the existence of late payment. 

Figure 4 shows that high cash reserves ratio 
reduces a company’s probability of default 

41. 

Late payment happens in the context of ‘borrowing liquidity’ – accomplished at 
the expense of the business partner52, either by obtaining the creditor’s validation 
by  exploiting  differences  in  bargaining  power,  or  by  unilaterally,  outright 
unlawfully paying late (breach of contract), with no fear for consequences. Asking 
for long or extended payment terms is a latent demand for cash. These sources of 
finance  are  substitutes  for  normal  trade  credit  and  bank  loans  or  overdrafts. But 
they are not free. The implicit interest rate in a trade credit agreement is usually 
very high as compared with the rates on bank credit53. Cost savings debtors obtain 

51 https://publications.banque-france.fr/en/do-late-customer-payments-impact-companies-probability-
default  
52 ‘Imagine walking into a shop, taking what you want up to the counter, and then, when the time comes to 
pay, saying ‘thanks – but I think I’ll just take these now and pay later’, and casually walking out with your 
items.’, https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-
Payments-Research-Sage.pdf  
53 V. Cuñat, Trade Credit: Suppliers as Debt Collectors and Insurance Providers, The Review of Financial 
Studies,  Volume  20,  Issue  2,  March  2007,  Pages  491–527,  https://doi.org/10.1093/rfs/hhl015,  and 
M. A. Petersen and R. G. Rajan, Trade Credit: Theories and Evidence, The Review of Financial Studies , 
Autumn,  1997,  Vol.  10,  No.  3 
(Autumn,  1997),  pp.  661-691,  Oxford  University  Press, 
https://www.jstor.org/stable/2962200  

18 

 
 
 
 
 
through late payment are illusionary because debtors effectively use and pay for 
their creditors’ working capital funding. We are assuming that a creditor needs a 
working capital credit line to fund trade credit to customers. We are assuming that 
creditor’s weaker bargaining power than the debtor’s means that creditor’s business 
risk is higher than debtor’s. Therefore, interest rate banks require from the creditor 
is  higher  than  they  require  from  the  debtor.  Late  payment  allows  therefore  the 
debtor to limit their collaboration with their bank, avoid applying for a loan and 
strengthen their cash position, but at a higher price. Provision of working capital 
financing can be considered as a standalone economic activity, to be declared under 
NACE section K.  

42. 

Departing from this context in which the debtor is seeking to strengthen their cash 
position and avoid talking to their bank, drivers for late payment can be found on 
three  fronts:  insufficient  preventive  measures,  market  failure  that  results  from 
imbalances  in  bargaining  power,  which  put  in  question  the  integrity  of  a 
commercial transaction, and finally, insufficient redress mechanisms.  

43. 

Next to these, there are drivers that cannot be addressed under this initiative, e.g. 
corrective  measures  addressing  inefficiencies  in  administrative  processes  for 
payment fall within the remit of the Member States. 

2.3.1 

Insufficient framework conditions 

44. 

45. 

The scene for potential late payment is often set before the commercial transaction 
is  concluded.  Several  factors  make  it  possible.  The  law  and  business  practices, 
which have so far relied on the principle of freedom of contract, have created a grey 
zone  for  assessing  the  level  of  fairness  in  setting  payment  terms  and  agreeing 
payment periods.  

The LPD fixes a maximum payment term in B2B transactions at 30 days but gives 
a wide margin of discretion to set longer terms by contract. Therefore, companies 
with  bargaining  power  impose  excessively  long  payment  terms  on  their  smaller 
suppliers. Lack of legally defined maximum payment term for  B2B transactions 
increases the likelihood a company will have to deal with late payment. 

46. 

The  LPD  insufficiently  clarifies  how  to  handle  the  duration  of  verification 
procedures54, very common in public procurement. In practice, payment terms are 
lengthened by delaying the moment a creditor is allowed to send the invoice.  

47.  While  trade  credit  is  universally  used  and  short  payment  periods  are  generally 
considered fair, this is not always the case for long payment periods or payment 
periods exceeding agreed payment terms55. This lack of clarity on which payment 

54 The LPD establishes that in cases where the contract provides for verification procedures to ascertain the 
conformity of the goods and services with the contract, the payment shall take place 30 days after that date, 
unless otherwise expressly agreed in the contract and provided it is not “grossly unfair” to the creditor. 
55 Trade credit is more expensive than bank credit because it includes costs  associated with having a late 
payment  option,  greater  risk  of  default  and  the  higher  cost  of  acquiring  funds  (Cuñat  2007). 
https://www.rba.gov.au/publications/bulletin/2013/sep/pdf/bu-0913-5.pdf  

19 

 
 
 
48. 

terms are fair leaves it to the party with stronger bargaining power to win the battle 
for liquidity and determine a transaction’s payment term. Based on this mechanism 
some sellers accept conditions with which they do not feel comfortable or consider 
unfair. Imbalance of power is a very important driver for B2B transactions56 (see 
Figure 14 on p. 187). In 2022, 61% of companies reported that they had been asked 
for longer payment terms than they were comfortable with57, and this includes both 
B2B  and  G2B  transactions.  EU  companies  consider  that  the  main  causes  for 
customers  to  pay  late58  include  the  fact  that  debtors  are  in  financial  difficulties, 
intentional late payment, and administrative inefficiency (reported by respectively 
54%, 50% and 48% of companies).  

SMEs appear to be under-utilising tools such as credit reference information59 to 
obtain information  on payment track-record of their prospective customers. It  is 
therefore difficult for them to estimate the risk that a potential client could pose for 
their  business.  Companies  need  a  better  understanding  of  their  exposure, 
vulnerabilities,  and  potential  losses  to  inform  resilience  strategies.  SMEs  need 
better financial management skills which would help  them to  reduce the risk of 
default, shorten the average collection period, and support an optimal cash  flow 
thanks to  effective  credit management. 70% of businesses indicated that lack of 
skills  and  in-house  know-how  are  preventing  them  from  improving  the 
management  of  payment  delays60.  Bad  invoice  management  disproportionately 
affects SMEs because they either cannot afford or rely less than large companies 
on  state-of-the-art  solutions,  which  can  immediately  reduce  the  risk  of  payment 
delays  or  accelerate  payment  (e.g.  digital  invoice  management  tools  or  e-
invoicing).  Many agreements  are still concluded  verbally,  e.g.  in  the agriculture 
sector.  These  can  lead  to  misunderstandings,  cause  difficulties  with  proving  the 
agreed conditions, and prevent the use of remedial actions. 

2.3.2  Market failure – imbalances in bargaining power  

49. 

The incidence of late payments in commercial transactions depends on the level of 
competition in a market and the bargaining power of companies. Some businesses 
accept late payment because they can afford it, can manage it and see it as a way to 
gain new customers. Insufficient bargaining power may influence creditor to accept 
long or late payment for fear of harming commercial relationships with stronger 
clients. Such fear is an important reason for not claiming interest or compensation 
for  late  payment61.  Strong  bargaining  power  may  encourage  debtors  to  seek  or 

56 B2B Comparative study 
57 EPR 2022 
58 EPR 2019 
59 ACCA and CBI (2010), Small Business Finance and the Recovery 
http://www.accaglobal.com/content/dam/acca/global/PDF-technical/small-business/pol-af-sbf.pdf  
60 EPR 2022 
61 https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2009:0316:FIN:en:PDF 

20 

 
 
 
impose  an  extension  of  the  payment  period,  a  practice  called  ‘supply-chain 
bullying’62.  

50.  Many payment terms agreed in this way are long. While they are considered lawful 
in light of the freedom of contract principle, on which the LPD is based, they are 
often considered unfair by the creditors. In 2021, 49% of EU businesses declared 
having accepted longer payment terms that they were comfortable with, in order 
not to damage client relationship63 (see Annex 17 for more details). This points to 
the fact that freedom of contract, on which the LPD has been based, and fairness in 
setting  payment  terms  do  not  always  go  together.  This  proposal  is  seeking  to 
address  the  need  for  more  fairness  in  B2B  transactions.  In  that  context,  some 
Member States, e.g. the Netherlands, Sweden, have put in place laws to address 
late payment. These provisions are stricter than the LPD – see Annex 23. 

51. 

52. 

53. 

54. 

The LPD does not sufficiently well protect creditors. The provisions regarding the 
payment of interest and a flat fee compensation for costs, in case of late payment 
required a court ruling to bring the necessary clarity64. ‘Entitlement’ to the interest 
and  compensation  is  a  heavily  underused  right.  Some  debtors  specifically 
circumvent these provisions by using such contractual clauses that make repayment 
of debt conditional on creditors’ agreement to give up their rights to interests and 
compensation. 

Enforcement is not lean enough, which encourages many debtors to take chances 
of not being sanctioned for paying late, also in light of the time and money needed 
to complete legal procedures. The consequences of late payment are not imminent 
or unavoidable. 

The rules that support the monitoring of compliance are not strong enough. There 
is  little  information  on  average  payment  terms,  average  payment  periods  or 
payment performance.  

The  LPD  is  not  sufficiently  well  linked  with  other  policies  related  to  public 
spending (e.g. public procurement, regional and structural funds), which prevents 
public (and EU) money from supporting fair payment. The  LPD lacks rules and 
tools  to  make  prompt  payments  the  norm  and  to  marginalise  bad  payment 
behaviour.  

55. 

Finally, public authorities do not lead by example. Commercial transactions with 
public bodies suffer from imbalances in bargaining power. Public authorities often 

62 https://www.gov.uk/government/news/business-secretary-launches-review-to-prevent-small-firms-from-
being-ripped-off-by-larger-companies 
https://www.linkedin.com/pulse/bullying-wrong-includes-big-brand-corporations-mark-pettler 
63 Intrum, European Payment Report 2021 
64 BFF Finance IBERIA C 585/20 
https://curia.europa.eu/juris/document/document.jsf;jsessionid=9ACA3ACE89C179B9127A057DD337BB
72?text=&docid=267402&pageIndex=0&doclang=ES&mode=lst&dir=&occ=first&part=1&cid=793023 

21 

 
 
 
 
do not pay on time, try to circumvent their legal obligations regarding interest and 
compensation, and do not set the example for B2B transactions. 

2.3.3 

Insufficient redress mechanisms 

56.  Many, especially small, companies are not aware of the provisions of the LPD, or 
how these are to be applied in practice. They also lack the ability to self-empower 
themselves and assert their rights to timely payments. The LPD does not provide 
small creditors with adequate tools to take action against their debtors. Legal action 
is  the  only  measure  envisaged  in  the  LPD,  and  it  is  usually  disproportionately 
costly, disproportionately time-consuming, and likely to damage business relations 
between the parties. 

57. 

Obtaining satisfactory result through taking matters to court is uncertain because 
of  weaknesses  of  the  LPD.  The  lack  of  clear  definition  of  ‘unfair’  practices  or 
clauses makes it difficult for companies to assess their chances of winning in court. 
Several provisions of the LPD build on the concept of ‘grossly unfair’, an undefined 
concept, which makes it difficult for a creditor to prove a specific contractual clause 
or  practice  as  unlawful.  Access  to  mediation  is  insufficient.  There  exist  other 
practices,  which  result  in  circumventing  the  LPD’s  obligations,  e.g.  practices 
banning  assignments  of  receivables,  which  hamper  factoring65  (see  Annex  10). 
These practices are not defined as unfair in the LPD which makes it very difficult 
for SMEs not to accept them.  

2.4  How likely is the problem to persist? 

58. 

59. 

60. 

If no additional EU action is taken, the identified issues are likely to persist (based 
on the input received by the Commission from stakeholders and desk research). 

Between years 2014 and 2022, the drop recorded after the transposition of the LPD 
did not bring payment times below 30 days. The spike following the coronavirus 
pandemic erased the gains made before 2020. The difficult economic context, high 
inflation  and  higher  interest  rates  are  likely  to  support  the  prevalence  of  late 
payments. The problem is highly unlikely to go away when the situation will have 
stabilised. Payment delays persist even during the absence of economic crises.  

Late  payment  remains  attractive  because  for  a  debtor  it  represents  the  quickest, 
easiest  and  paperless  way  to  obtain  financing.  The  bargaining  power,  not 
sufficiently harnessed by the provisions of the LPD, and the lack of clear guidance 
on which payment terms are fair will allow parties to continue paying as they see 
fit. 

61. 

So  far,  the  Commission’s  enforcement  action  has  been  limited  to  infringement 
procedures  against  Member  States,  reporting  on  payment  performance  in  the 
European Semester and making country specific recommendations. Several recent 

65 If the contract restricts the parties’ ability to assign or transfer rights created under the contract, restrictions 
on assignment can prevent the parties from factoring receivables or otherwise raising finance on them. 

22 

 
 
 
62. 

63. 

64. 

legal initiatives and ongoing projects may affect the issue of commercial payments. 
All of these are assessed under the baseline. 

The current situation allows for different provisions in different Member States and 
therefore a risk of market fragmentation. For example, in some Member States the 
compensation interest stops accruing once its amount is equal to the amount of the 
underlying overdue payment. Furthermore, the LPD was not correctly transposed 
in several Member States, with currently still 2 active infringement procedures, due 
to non-conformity of legislation. This also makes it difficult for courts to deliver 
consistent judgments and for companies to evaluate their chances of success in the 
court.  This  is  further  aggravated  in  cross-border  situations,  when  dealing  with 
justice systems in other EU Member State(s) becomes necessary. 

Late payers who start paying on time would need to seek working capital financing. 
This would entail a certain adjustment process of obtaining a credit loan and the 
payment  of  the  interest.  The  net  financing  cost  for  the  debtor  would  likely  go 
down66, but the cost of dealing with the bank would increase.  

No megatrends apply to the late payment problem tackled by this initiative67. The 
initiative  will  support  developing  a  future-proof  and  agile  EU  regulatory 
framework,  with  the  single  market  at  its  heart,  which  will  be  conducive  to 
sustainable business models and consumption patterns and EU competitiveness, as 
identified in the strategic foresight report among areas of action for a successful 
twinning68. 

3  WHY SHOULD THE EU ACT?  

3.1  Legal basis 

65. 

66. 

67. 

This initiative aims to enhance competitiveness in the single market by reinforcing 
the  provisions  to  prevent  late  payments,  thereby  creating  a  culture  of  prompt 
payment.  

Article 114 of the Treaty on the Functioning of the EU (TFEU) is the appropriate 
legal basis for this initiative to achieve its objectives. This article is the appropriate 
legal  basis  for  measures  aimed  at  achieving  the  objectives  set  out  in  Article  26 
TFEU (harmonising national provisions).  

The  overall  objective  of  this  legislative  proposal  is  to  ensure  the  smooth 
functioning of the EU single market by combating the unlawful misappropriation 
of liquidity in the EU market. There is a strong value added of action at EU level 
because the problems that this proposal tackles affect cross-border transactions and 
are not limited to the territory of a single Member State. Member States on their 
own  could  not  bring  about  a  consistent  improvement  to  those  problems.  The 

66 Assumption follows from the creditor’s weaker bargaining power than debtor’s, which allows the debtor 
to impose long or late payment terms in a commercial transaction. 
67 https://commission.europa.eu/system/files/2022-06/br_toolbox_-_nov_2021_-_chapter_3.pdf p.156 
68 Strategic foresight report 2022 

23 

 
 
 
revision also aims at boosting sustainable competitiveness, increasing both fairness 
and liquidity  in  the single market,  enabling the digital and twin  transition  while 
reducing the administrative burden of chasing debtors. 

68. 

Coordinated action is required to ensure that all Member States have the minimum 
rules in place to prevent late payments, have the right enforcement and deterrent 
measures  to  combat  late  payments  and  the  adequate  means  of  redress.  In  this 
context,  the  targeted  EU  intervention  through  this  proposal  complies  with  the 
principle of subsidiarity.  

69. 

The LPD is a recast of the first Late Payment Directive (Directive 2000/35/EC), 
based  on  Article  95  TEC.  The  LPD  and  its  revision  fall  within  the  joint  remit 
(‘shared competence’) of the EU and its member governments. 

3.2  Subsidiarity: necessity of EU action 

70. 

71. 

72. 

73. 

74. 

The ‘history’ behind the adoption of the current and previous Directive (see Annex 
6)  illustrates  that  the  need  of  EU  action  against  late  payments  has  been  evident 
since 1995.  

The problem of late payments is widespread across the EU and affects all Member 
States.  The  causes  of  the  problem  are  common  in  all  EU  Member  States. 
Facilitating prompt payment will require all Member States to make rules stricter 
in a coordinated way. Implementing 27 national solutions would likely result in a 
lack  of  uniform  rules,  fragmentation  of  the  single  market  and  higher  cost  for 
companies trading across borders. The EU dimension is justified by the fact that 
this action affects all commercial transactions in public procurement and between 
businesses, regardless of their size. It is the very essence of the single market. This 
action concerns the revision  of existing  EU  legislation in  order to  strengthen its 
provisions; therefore, it can be done only at EU level.  

Some EU countries have introduced national rules that are more stringent than the 
LPD and grant better protection to SMEs – for example capping payment terms in 
B2B transactions at 30 days when the creditor is an SME or setting up enforcement 
bodies.  At  the  same  time,  some  national  legislations  have  introduced  a  ban  on 
assigning receivables, thereby prohibiting the restriction on the parties’ ability to 
assign or transfer rights that helps getting finance. To avoid fragmentation of the 
single  market,  it  is  necessary  to  ensure  homogenous  implementation  and 
enforcement of the rules.  

Similarly, co-ordinated action is  required  to  tackle the asymmetry of power and 
asymmetry of information, as well as means of redress across Member States.  

Therefore, Member States acting individually could not satisfactorily remove the 
barriers to ensure prompt payment across the EU. A coherent legal framework for 
payment terms, payments of interest and compensation and enforcement, can only 
be achieved at EU level. 

24 

 
 
3.3  Subsidiarity: added value of EU action 

75. 

Value added of EU action for this initiative is strong because it seeks to address a 
widespread,  EU-wide  problem,  which  affects  not  only  intra-Member  State 
transactions,  but  also  cross-border  transactions  in  the  single  market.  Payments 
allow  the  single  market  to  function.  Late  payment  may  affect  any  commercial 
transaction in the EU. This initiative concerns the revision of an already exiting EU 
legislation  (Directive  2011/7/EU)  therefore,  it  can  be  done  only  at  EU  level. 
Implementing  27  solutions  to  lay  down  rules  on  national  level  would  risk 
fragmenting the single market and bring additional familiarisation and compliance 
costs for companies trading across borders in the EU. 

76. 

A coordinated action at EU level including Member States is required to: 

1)  define provisions on interest and compensation fees (articles 3,4, and 6) so that they 

can be transposed in a uniform manner into national legislations, 

2)  establish  clearer  payment  terms  for  B2B,  as  well  as  enforcement  and  monitoring 

provisions, that apply cross border,  

3)  ensure that there are synergies with the public procurement framework, and especially 
taking into account that the National Recovery and Resilience Plans in the Member 
States are implemented primarily through public procurement. 

77. 

In  line  with  the  principle  of  proportionality,  the  planned  initiative  will  not  go 
beyond  what  is  necessary  to  achieve  its  objectives  by  revising  the  current  rules 
applicable  to  all  commercial  transactions  in  public  procurement  and  between 
businesses, which could not be achieved by Member States on their own (see in 
particular section 5.4 and Annex 14). 

4  OBJECTIVES: WHAT IS TO BE ACHIEVED?  

78. 

The  initiative  is  expected  to  contribute  to  progress  towards  Sustainable 
Development  Goals  no.  8:  Decent  work  and  economic  growth,  no.  3:  Ensure 
healthy lives and promote well-being for all at all ages, no. 4: Quality education 
and no. 9: Industry, innovation and infrastructure. Further details are in Annex 3. 

4.1  General objectives  

79. 

The general objective is to ensure the proper functioning of the internal market and 
competitiveness  for  EU  companies  by  laying  down  rules  to  grant  companies 
appropriate  conditions  to  receive  fair  and  timely  payment  for  their  goods  or 
services.  This  initiative  aims  to  contribute  to  strengthening  competitiveness  and 
growth  of  companies  active  in  the  internal  market  by  improving  the  payment 
discipline of all concerned actors (SMEs, large businesses and public authorities) 
and protecting SMEs against the negative effects of payment delays in commercial 
transactions. 

80. 

The  need  to  ensure  that  the  internal  market  can  work  for  the  sustainable 
development of Europe, based on balanced economic growth, a highly competitive 

25 

 
 
social  market  economy,  and  that  it  can  promote  economic  and  social  cohesion, 
follows from Article 3 of the TEU. 

Figure 5: Late payment problem - general and specific objectives 

4.2  Specific objectives  

81. 

The specific objectives are: 

4.2.1  To prevent late payment from occurring 

82. 

The first specific objective of the intervention would be to provide a clear set of 
measures to prevent late payment and make companies more aware of their rights 
and  obligations,  notably  by  fixing  maximum  payment  terms  or  mastering 
companies’  proficiency  in  credit  management  and  digital  literacy.  The  specific 
objective  aims  to  facilitate  business-to-business  relations  between  companies 
especially in the early (mainly pre-contractual) stage of their business relationship 
and to allow them: 

1)  to plan and dedicate their resources to their core activities, and  
2)  to  fully  understand  the  benefits  offered  by  streamlined  and  timely  cash  flows,  that 

better correspond to the flow of physical goods or delivered services.  

83. 

The initiative should lead to creating a more predictable business environment for 
those enterprises which use trade credit to sell their products or services. 

26 

 
 
 
4.2.2  To facilitate timely payment 

84. 

The  second  specific  objective  refers  to  the  contractual  stage  of  a  business 
relationship. It aims to make it easier for companies to receive due payments on 
time, to help them exercise their right to systematically receive interest and the flat 
fee  compensation,  and  to  ensure  better  enforcement  of  the  rules  by  creating 
appropriate  mechanisms  for  enforcement.  These  mechanisms  should  ensure  the 
necessary speed, independence and affordability to overcome the observed gap in 
the  application  of  LPD’s  provisions.  A  stronger  commitment  from  the  public 
authorities to pay on time and to lead by example is also necessary, especially in 
public procurement context. 

4.2.3  To empower SMEs and ensure more fairness in commercial transactions 

85. 

The  third  specific  objective  is  to  empower  SMEs  and  ensure  more  fairness  in 
commercial  transactions,  to  make  it  easier  for  companies  to  assert  their  right  to 
receive  timely  payments.  This  objective  seeks  to  respond  to  the  need  to  request 
Member States to specifically address the question of unfair contractual terms and 
practices  through  their  applicable  national  law,  address  insufficient  access  to 
mediation, or create better framework for redress possibilities. The objective seeks 
in  companies’  situation  without  creating  unnecessary  or 
improvement 
disproportionate burdens and facilitate access to effective redress, where currently 
a judicial procedure represents the only available option. 

86. 

These three objectives address the problem drivers identified in section 2.3. Each 
specific objective corresponds to an individual driver.  

5  WHAT ARE THE AVAILABLE POLICY OPTIONS?  

5.1  What is the baseline from which options are assessed? 

87. 

As set out in section 2.4, the initiative is not linked to any of the megatrends but 
would support the area of action for a successful twinning related to developing an 
EU regulatory framework with the single market at its heart. 

88.  More than 70% of businesses never claim interests or compensation when paid late. 
In  the  absence  of  EU  action  with  respect  to  the  LPD,  businesses  are  likely  to 
continue experiencing payment delays. The identified weaknesses of the LPD: the 
absence  of  a  cap  on  payment  terms  in  B2B  transactions,  unclear  provisions 
regarding unfair payment practices, the payment of interest and compensation and 
the  absence  of  means  for  monitoring  and  enforcement,  would  continue  to 
negatively affect the payment performance of companies. The fact that the current 
provisions  do  not  sufficiently  empower  the  creditor  to  claim  interests  and 
compensations has led to a proliferation of national schemes, business practices or 
contractual clauses whereby debtors make repayment of their debt conditional on 
creditors’ giving up their rights to interests and compensation. Should the LPD’s 
sanctioning  powers  remain  unchanged,  its  creditor  protection  provisions  will 
continue to be circumvented.  

27 

 
 
89. 

90. 

91. 

92. 

93. 

94. 

Companies do not claim the EUR 40 flat fee compensation for recovery costs. The 
amount of the fee no longer covers the hassle cost of chasing debtors.  

The Commission would continue to enforce the LPD mainly through the European 
Semester’s country specific recommendations or through infringement procedures 
for  bad  application  or  incorrect  transposition  of  the  LPD.  Both  are  lenghty 
procedures  unlikely  to  have  the  desired  effects.  In  that  context,  a  number  of 
Member States have been requested to provide regular reporting on their payment 
behaviour. 

Since the problem is not new, the EU initiatives already put in place to tackle the 
problem of late payment form part of the baseline. Examples are set out below. 

The  UTP  directive  (article  1)  addresses  the  capping  of  B2B  payment  terms  and 
clarifies what are practices that ‘grossly deviate from good commercial conduct’, 
which can be used as a proxy for understanding what ‘grossly unfair’ means. EU 
countries were required to transpose the directive into national law by 1 May 2021 
and  apply  it  six  months  after.  It  aims  to  better  protect  farmers  and  small  and 
medium sized suppliers in the agro-food sector. It provides for mandatory rules that 
outlaw certain unfair trading practices. It bans 10 unfair trading practices and lists 
further 6 unfair trading practices, which are only allowed if the supplier and the 
buyer agree on them beforehand in a clear and unambigious manner. Such practices 
include unfair payment terms, and provide for enforcement and fines. 

Several court rulings linked to the LPD have given guidance on the interpretation 
of  the  interest  and  compensation  claims,  (see  section  1.3  and  Annex  11).  It  is 
preferable to reflect them in the wording of the LPD to make it easier for companies 
to secure their rights. 

A pilot project for a temporary EU Observatory for late payments was launched in 
2023  to  support  the  monitoring  of  compliance  with  payment  terms  and 
transparency on payment performance, such as collection of statistics on average 
payment  periods  or  average  payment  terms  in  B2B  and  G2B  transactions  (see 
Annex 7). The project relies on voluntary data provision and builds on national and 
sectoral databases, leading to issues of coherence and comparability of data. The 
European  construction  sector  observatory  (ECSO)69  regularly  analyses  and 
comparatively assesses payment performance in the construction sector in 27 EU 
countries and the UK.  

95. 

The Corporate Sustainability Reporting Directive70 (see Annex 14) acknowledges 
the important role of payment practices in the management of a company and the 

69 https://single-market-economy.ec.europa.eu/sectors/construction/observatory_en 
70 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022L2464&from=EN  

28 

 
 
 
96. 

97. 

98. 

99. 

quality of relationships with suppliers and requires payment practices to be covered 
in the reporting standards71. 

Digital means such as e-invoicing can facilitate timely payments. Promoting the 
use of modern digital payment tools  and digital literacy can result in shortening 
invoice-processing  time,  reducing  error  rates  and  streamlining  companies’  cash 
management.  Since  the  adoption  of  the  LPD,  both  digital  banking  payment 
solutions and automated accountancy programs have become universally available 
on the market. They can foster prompt payment by providing liquidity management 
solutions.  

Digital  solutions  can  boost  transparency  and  facilitate  reporting  obligations 
resulting from several legal instruments. The directive on electronic invoicing in 
public procurement72 aims to make the use of e-invoicing widespread. The VAT in 
the digital age proposal73 aims to make compliance with VAT easier for businesses 
by better harnessing the potential offered by digitalisation. Public authorities and 
companies  could  benefit  from  open  and  reusable  digital  solutions74  which  the 
Commission  is  making  available  for  free,  e.g.  eID,  eSignature,  eDelivery,  see 
Annex 22. 

The Commission launched a call in March 2023 for a pilot project for the uptake 
of alternative dispute resolution mechanisms and mediation75 to address the lack of 
accessible (i.e. alternative to legal action) tools for companies to take action against 
their debtors. The project’s limitations (geographical scope, duration) are unlikely 
to provide a sustainable EU-wide solution. 

Finally, higher inflation and higher interest rates provide additional incentives for 
paying late. With record-high inflation exceeding 9% in 202276 and associated rises 
in interest rates, the possibility of using free funding (by paying late) has become 
more attractive. Inflation also points to the need to adjust the EUR 40 compensation 
fee  for  hassle  costs  to  which  a  creditor  has  the  right.  According  to  an  EU-wide 
survey77, six out of ten companies are worried that the risk of late payments will 
grow in the short term, due to inflation. 

100.  The current baseline is likely to deteriorate in the future because of the war at EU’s 

borders, inflation, higher interest rates and energy prices shock.  

71 Reporting standards (including one on payment practices) are in preparation; in the draft standards, it is 
proposed that payment practices’ disclosure  is conditional on the company’s materiality assessment.  The 
Directive will become gradually applicable starting with the businesses’ financial year of 2024. 
72 2014/55/EU - https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0055  
73 https://taxation-customs.ec.europa.eu/taxation-1/value-added-tax-vat/vat-digital-age_en 
74 https://ec.europa.eu/digital-building-blocks/wikis/display/DIGITAL/Digital+Homepage 
75 Services - 127264-2023 - TED Tenders Electronic Daily (europa.eu)  
76 In 2022, EU annual inflation reached the highest level ever measured at 9.2%. Compared with 2021, when 
the  annual  value  was  2.9%,  it  more  than  tripled.  https://ec.europa.eu/eurostat/web/products-eurostat-
news/w/DDN-20230309-2  
77 June 2022, https://europa.eu/eurobarometer/surveys/detail/2244 

29 

 
 
 
5.2  Description of the policy options  

101.  The policy options (PO) address the problem drivers (section 2.3) through a user-

driven approach to achieve the objectives (section 4), in particular by: 

1)  fixing the framework conditions to prevent late payments;  
2)  fixing the market failure resulting from imbalances in bargaining power  to facilitate 

timely payments;  

3)  empowering SMEs to take action, challenge unfair conditions and claim redress when 

paid late. 

102.  The activities related to the monitoring LPD’s implementation (see Annex 6) have 
allowed the Commission during the last 10 years to pre-identify the specific areas 
for intervention among several possibilities across the political/regulatory spectrum 
(defined within the limits of political and legal feasibility and Treaty competences, 
see Annex 14). The options presented and assessed in this report focus on areas of 
intervention pre-identified as critical for combating late payments: the ‘framework 
conditions’ including the degree of freedom of contract, ‘the enforcement’ and the 
‘redress mechanisms’.  

103.  Each  option  presents  a  different  degree  of  intervention  among  these  areas.  PO1 
considers a stronger intervention on the ‘freedom of contract’ under ‘framework 
conditions’ to bring a better balance between freedom of negotiation and fairness, 
by laying down stricter payment terms. The option’s rationale is prevention and it 
envisages no EU intervention on ‘enforcement’ and ‘redress mechanisms’, leaving 
these elements to the existing baseline scenario. This approach essentially follows 
the specific policy choice recently made in the Netherlands, where payment terms 
in  B2B  transactions  have  been  reduced  from  60  to  30  days78.  PO2  focuses  on 
‘enforcement’,  by  sharpening  deterrents  (interest  and  compensation  fees)  and 
designating enforcement bodies. This option leaves more freedom to the parties at 
the  outset  of  their  contractual  relationship  but  is  more  focused  on  ensuring  the 
implementation of the will of the parties. The rationale for this option is to ensure 
that agreed payment conditions are met and intervening only if this is not the case. 
This approach has recently been put in place in Spain (see Annex 9). PO3 focuses 
the intervention on remedial measures. It is the least interventionist at the level of 
the freedom of the parties. The measures assessed under this option seek to improve 
the redress conditions when payment terms – which have been freely negotiated – 
are  not  met,  and  where  the  existing  deterrents  have  not  been  effective.  This 
approach  has  been  implemented  in  Belgium  and  in  Ireland  in  the  construction 
sector79.  

104.  Each  proposed  policy  option  is  put  forward  as  standalone,  therefore  can  be 
introduced independently from others. However, each option aims to address only 
a  part  of  the  shortcomings  of  the  current  situation.  In  addition,  options  include 

78 https://business.gov.nl/amendment/legal-payment-term-large-companies-reduced-30-days/ 
79  Belgium: 
https://economie.fgov.be/fr/themes/line/belmed-mediation-en-ligne/reglement-alternatif-
de/sortes-de-reglements-des/conciliation/commission-de-conciliation,  Ireland:  Construction  Contracts  Act 
2013.  

30 

 
 
 
different  sub-options  which  vary  in  the  degree  to  which  they  respond  to  the 
individual specific objectives. 

105.  Policy options contain legal measures. The analysis consists in choosing the best 
sub-option  to  address  the  policy  option  to  which  it  belongs.  In  the  next  step, 
individual  (standalone)  policy  options  are  compared  against  a  package  of 
individual policy options to determine the best way to achieve the objectives. The 
preferred package is a combination of three policy options. 

5.2.1  Policy option 1: Prevent late payment from occurring  

106.  Policy  option  1  (PO1)  seeks  to  address  drivers  (section  2.3.1)  identified  with 
regards the specific objective 1 (section 4.2.1). Policy measures considered under 
this  option  aim  at  ensuring  prevention.  They  focus  on  the  early  stages  of 
commercial transaction, including the stage before the contract is signed. This is 
because late payments may stem from unfairly negotiated contracts, which from 
the start force the creditor to accept excessively long payment terms. Through this 
practice a debtor plans for an effective payment delay and incorporates it into the 
contract. The problem becomes invisible, because it is included from the start into 
the contract and formally accepted by the creditor.  

107.  The current regulatory framework does not set an absolute maximum payment term 
in B2B transactions. The EP pleaded for the setting up of preventive measures to 
combat late payments, including capping of payment terms in B2B transactions, 
introducing transparency obligations, and providing SMEs with training on credit 
and invoice management80. The Fit for Future platform refers to similar measures 
(recommendations number 4, 5 and 7 of the F4F opinion 2021).  

108.  Policy option 1a (PO1a) sets up a maximum payment term in B2B transactions, 
making  it  mandatory  for  businesses  to  pay  in  maximum  30  days.  This  would 
introduce a clear legal limit to B2B transactions. While this would limit the current 
freedom  of  contract,  it  would  boost  the  degree  of  fairness  with  which  payment 
terms are set and establish a better balance in the negotiation of payment terms.  

109.  A possibility for capping payments in B2B transactions at 30 days but allowing for 
(longer) specific payment terms for certain identified sectors, in particular those 
characterised by seasonality or long shelf-life of products81 is addressed in section 
6.  In  France  there  are  specific  payment  terms  for  identified  sectors  (‘Délais 
dérogatoires’)82. 

80 EP Resolution 2019 
81 B2B Comparative Study 2018 
82 https://www.economie.gouv.fr/dgccrf/Publications/Vie-pratique/fiches-pratiques/Delais-de-
paiement#:~:text=Le%20d%C3%A9lai%20convenu%20entre%20les,abus%20manifeste%20au%20d%C3
%A9triment%20du 

31 

 
 
 
Table 1: Policy option 1 

Prevent late payments 

Baseline  

PO 1a 

PO 1b 

PO 1c 

No  capping  in  B2B  transactions 
will continue supporting the less-
than-satisfactory 
payment 
performance in B2B transactions, 
eroding the potential for smaller 
to 
in  particular 
companies 
become more competitive.  

Capping  at  30 
B2B 
in 
days 
transactions 
Verification 
acceptance 
procedure  capped 
at  30  days 
(no 
derogation) 

or 

Capping  at  60 
B2B 
in 
days 
transactions.  
Verification 
acceptance 
procedure  capped 
at  30  days 
(no 
derogation) 

of 

Capping at 60 days 
B2B 
in 
transactions where 
the  creditor  is  an 
SME.  
Verification 
acceptance 
procedure  capped 
at  30  days 
(no 
derogation). 

or 

Lack of credit management skills 
and relevant training material for 
SMEs  makes 
them  more 
vulnerable  to  the  risk  of  being 
paid late.  

MS  facilitate  availability  and  access  of  SMEs  to  credit 
management tools, financial literacy training and foster the use 
by SMEs of digital tools for timely payments 

110.  The verification procedure for assessing the compliance of the goods or services 
would be capped at 30 days. Therefore, the result would be a maximum of 60-day 
(30+30) payment term for all B2B transactions and where a verification procedure 
is  required  by  the  contract.  The  Court  of  Justice83  emphasised  that  verification 
procedures are often used to delay artificially the payment period84 and therefore, 
their inclusion in the contract must be ‘objectively justified by the particular nature 
of the contract in question or by certain of its characteristics’85. 

111. 

PO1 proposes different combinations of the same type of measures to make sure 
that payment terms are negotiated fairly.  

112.  PO1a  includes  measures  to  address  the  information  asymmetry  about  payment 
performance  of  public  authorities.  Knowing  whether  a  perspective  public  sector 
client  is  a  good  payer  or  not,  is  valuable  information.  The  company  could  then 
factor it in  in the tender or offer.  The data made available through this measure 
would  be  included  in  the  EU  observatory  of  payments  and  support  the 
Commission’s enforcement activities. 

113.  Member  States  should  boost  availability  and  facilitate  access  of  to  credit 
management and financial literacy training for SMEs, to make them less vulnerable 
to late payment. 

114.  Policy option 1b (PO1b) would cap payment terms in B2B transactions at 60 days. 
It would allow to limit the impact on the freedom of contract, while reducing the 

83 In case C-585/60, points 47 to 49, referring specifically to G2B contracts 
84 EP Resolution 2019 
85 ECJ preliminary ruling in case C-585/20, paragraph 48.  

32 

 
 
 
  
 
 
room for discretion and unfairness. Verification procedure would be capped at 30 
days.  PO1b  would  set  the  maximum  of  90  days  for  payment  terms  in  B2B 
transactions, where the contract provides for a verification procedure (which must 
be objectively justified).  

115.  Measures to address the information asymmetry on payment performance and to 
boost availability and facilitate access of SMEs to credit management and financial 
literacy training would be the same as under PO1a.  

116.  Policy  option  1c  (PO1c)  is  similar  to  PO1b  in  capping  payment  terms  in  B2B 
transactions at 60 days. However, this limit would apply only to B2B transactions 
where the creditor is an SME. Identifying SMEs will rely on the criteria laid down 
in the SME Definition86. Payment terms in transactions between large businesses, 
or between SMEs and large businesses, where the SME is the debtor, would remain 
regulated according to the current provisions. This specific measure is already in 
place in Belgium and in Poland87. In the Netherlands it was applied from 2017 until 
2022 (in 2022 the cap was brought from 60 to 30 days). Capping the verification 
procedure at 30 days aims to ensure a predictable payment framework for SMEs, 
so  that  they  can  expect  that  payments  they  are  owed  in  B2B  commercial 
transactions  do  not  exceed  60  days  -  or  90  days  if  a  verification  procedure  is 
included in the contract and objectively justified.  

117.  Measures to address the information asymmetry on payment performance and to 
boost availability and facilitate access of SMEs to credit management and financial 
literacy training would be the same as under PO1a and PO1b.  

5.2.2  Policy option 2: Facilitate timely payments  

118.  Policy  option  2  (PO2)  contributes  to  specific  objective  2  (section  4.2.2).  The 
measures under this policy option aim at combating late payments by ensuring that 
the rules are enforced, payment terms are respected, and administrative sanctions 
kick-in in case of no-compliance (see point 21 of the EP Resolution 2019). 

119.  Policy  measures  under  PO2  provide  for  using  stronger  deterrents,  setting  up 
enforcement bodies, and verifying that payment to the main contractor has been 
passed onto the subcontractors in public works contracts. As a standalone option, 
these  proposals  would  apply  irrespective  of  the  baseline  for  the  setting  of  the 
payment  terms.  Some  of  the  proposed  measures  directly  respond  to  the  EP 
Resolution  of  2019  and  the  opinion  of  the  Fit  for  Future  platform  2021 
(recommendation n.10).  

120.  The  first  measure  proposed  under  policy  options  2a  (PO2a)  and  2b  (PO2b) 
consists in removing the current ‘entitlement’ to interests and compensation fees 
and  making  their  payment  legally  automatic  (see  glossary).  This  means  that 
businesses and public authorities, if they do not comply with the statutory payment 

86 Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of SME. https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32003H0361  
87 Belgium: Act of 14 August 2021, Poland: Act of 19 July 2019 

33 

 
 
 
terms or the terms agreed in the contract, shall be legally obliged to pay interests 
and  flat  fee  compensations.  Any  negotiation,  practice  or  clause  to  the  contrary 
would be a violation of the rules. According to this measure, the only legal way to 
avoid paying interest and compensations is paying on time. Furthermore, it will be 
clarified  that  interests  continue  accruing  until  the  legal  obligation  to  pay  is 
extinguished (see court case C-256/15 in Annex 11).  

121.  The  subsequent  set  of  measures  consist  in  increasing  the  efficacy  of  the  late 
payment compensation by exploring whether they should be adapted to inflation or 
not, and, for the EUR 40 flat fee compensation, whether introducing a staggered 
value according to the value of the invoice (as in the original proposal for the LPD, 
and as applied in Ireland and Poland) would be an effective solution or should the 
fee be revised to EUR 50 to account for past inflation.  

122.  Enforcement is a key issue identified in the drivers, which was neither addressed 
in Directive 2000/35/EC nor in the LPD. The EP Resolution 2021 recalled in this 
respect  that  the  (then)  ‘proposal  for  a  directive  on  unfair  trading  practices  in 
business-to-business  relationships  in  the  food  supply  chain  (COM(2018)0173) 
includes provisions on late payments […] and the designation by Member States 
of an enforcement authority to monitor compliance with the rules.’ PO2a and PO2b 
differ in the degree of powers they entrust to the enforcement body.  

123.  Fostering better synergies with other EU policies, e.g. on public procurement, can 
strengthen  the  enforcement  of  the  obligation  to  pay  on  time.  The  1995 
Recommendation  and  the  2019  EP  Resolution  indicated  specific  measures  to 
ensure this synergy. This measure was inspired by the recently introduced Spanish 
legislation  ‘Crea  y  Crece’88  and  is  without  prejudice  to  trade  confidentiality 
agreements that might exist between main contractor and subcontractors.  

Table 2: Policy option 2 

Baseline 

2a  

2b  

Make timely payments happen  

Under the current provisions, the creditor is 
not  obliged 
interests  and 
to  claim 
compensations. This has led to adoption of 
national  schemes,  private  practices  and 
clauses  whereby  payment  (even  delayed 
payment)  is  made  conditional  upon  the 
creditors’  waiver  of  their  rights  to  claim 
interests and compensations. In this way the 
LPD will continue to be deprived of its sole 
sanctioning 
tool,  and  deterrents  will 
continue  to  be  circumvented.  More  than 
70% of businesses never claim interests and 
compensations when paid late.  

Making payment of interests automatic (eliminate the concept of 
‘entitlement’)  and  clarify  the  ‘dies  ad  quem’  and  making 
payment of the flat fee compensation automatic 
Leave  the  rate  of  interests  for 
late 
such 
(ECB+8%) but adapt the flat 
fee compensation to inflation 
(one  time  adaptation,  to  EUR 
50)  

Leave  the  rate  of  interests  for 
late 
such 
(ECB+8% - no change) but for 
the  flat  fee  compensation, 
reintroduce a: 

payment 

payment 

as 

as 

40 EUR for debts up to 1,000 
EUR 
70  EUR  for  debts  between 
1,000 and 10,000 EUR 

88 Law of 28 September 2022 on the Creation and Growth of businesses 
https://www.boe.es/diario_boe/txt.php?id=BOE-A-2022-15818, see in particular the amendments to 
Articles 216 and 217 of the Law on public contract “ Obligación de comprobación del pago a los 
subcontratistas” (“Obligation to verify payment to subcontractors”)  

34 

 
 
 
 
100  EUR  for  debts  of  more 
than 10,000 EUR 

to 

MS 
bodies 
designate 
monitoring the application of 
the law.  

the 

to  designate  bodies 
MS 
the 
for 
responsible 
enforcement  of 
law, 
carrying  out  investigations  ex 
officio,  acting  on  complaints, 
and  empowered 
issue 
administrative  sanctions  and 
publish the name of offenders 
(‘name  and  shame’).  Use  of 
digital 
for  more 
tools 
effective enforcement. 

to 

authorities 

contracting 

In public works contracts falling within the scope of the public 
procurement  directives*, 
and 
contracting  entities  (for  the  purpose  of  this  impact  assessment 
included  as  well  when  falling  under  the  scope  of  the  public 
procurement  directives)  shall  verify  that  payment  to  the  main 
contractor  has  been  passed  onto  the  subcontractors.  For  this 
purpose,  the  main  contractor  shall  provide  to  the  contracting 
authority a certificate or proof of payment to the subcontractors 
at each intermediate work certification. 

*) The threshold for public works contracts under the scope of 
Directives 
and 
2009/81/EC  is  currently  5.382.000  EUR  (subject  to  regular 
review by delegated acts). 

2014/23/EU, 

2014/24/EU, 

2014/25/EU 

application 

the  EUR 

The 
40 
of 
compensation for recovery costs has proven 
to  be  very  difficult  since  the  entering  into 
force of the LPD. Only recently has the ECJ 
clarified  that  this  compensation  applies  to 
each 
late  payment 
interests are claimed.  

invoice  for  which 

through 

the  supply  chains 

Currently there are little synergies between 
prompt  payment  policy  objectives  and 
public  procurement  framework,  although 
the EP stressed the need to put in place such 
synergies  back  in  2019.  In  fact,  when 
contracting 
contracting 
authorities  or 
entities  pay  their  suppliers,  there  is  no 
mechanism  to  ensure  that  this  payment 
flows 
to 
subcontractors.  The  public  procurement 
Directives  foresee  already  that  contracting 
authorities,  once  the  contract  has  been 
awarded, can identify the subcontractors in 
the  supply  chain.  Despite  this,  there  is  no 
mechanism,  obligation  or  tool  ensuring 
information 
that 
payment  has  been  made  to  the  main 
contractor.  The  provisions  on  direct 
payment to subcontractors are not apt to fill 
this gap because they are voluntary (only 18 
MS out of 27 have transposed it) and their 
transposition  has  been  varied 
(see 
Economisti study 2022). 

the  subcontractors 

to 

5.2.3  Policy  option  3:  Strengthening  redress  mechanisms  to  ensure  fair  payment 

conditions and to empower SMEs 

124.  Policy option 3 (PO3) seeks to contribute to the specific objective 3 to complement 
and strengthen redress mechanisms to empower SMEs and ensure more fairness in 
commercial transactions. 

125.  The  policy  options  3a  (PO3a)  and  3b  (PO3b)  aim  to  remove  ambiguity  in 
definitions,  reward  and  support  prompt  payment,  eliminate  possibilities  for 
arbitrary  interpretation  of  the  law,  and  empower  SMEs  to  challenge  unfair 
conditions.  The  measures  on  ADR,  the  need  to  address  the  question  of  unfair 
contractual terms and practices through their applicable national law are inspired 
by  the  EP  Resolution  2019  and  the  Fit  for  Future  platform’s  opinion  2021 
(recommendations 1, 2, 3 and 6). 

35 

 
 
 
  
 
 
 
 
126.  Policy  options  3a  (PO3a)  and  3b  (PO3b)  focus  on  empowering  SMEs  to 
challenge  lack  of  fairness  in  payment  conditions  by  providing  means  of  redress 
alternative to court proceedings. The options explore the alternatives of appointing 
a national payment envoy (PO3a) or setting up a national mediation system to solve 
payment disputes (PO3b). 

Table 3: Policy option 3 

Empower SMEs and ensure more fairness in commercial transactions  

Baseline  
Due  to  size  or  position  in  the  supply  chain,  small 
businesses will continue to be more exposed to the 
risk of being paid late.  

PO 3a 
MS  to  appoint  a  national 
payment envoy  

PO 3b 
MS  to  set  up  a  national 
system  of  mediation  to 
solve payment disputes  

Require  Member  States  to  specifically  address  the 
question  of  unfair  contractual  terms  and  practices 
through their applicable national law. 

The  current  ambiguity  about  ‘unfairness’  will 
continue as well as the current situation where it is 
always  the  creditor  having  to  bear  the  burden  of 
proving that a certain clause or a certain practice is 
unfair.  With  very  limited  alternatives  to  court 
time  consuming, 
proceedings,  which  can  be 
the 
expensive,  and  can 
business  relation,  creditors  will  continue  to  be 
reluctant  to  take  action  against  their  debtors,  and 
challenge  unfair  payment  conditions  or  practices. 
The  only  remedy  will  be,  in  many  cases,  further 
delay payments to their own suppliers, so passing the 
late payment down the supply chain.  

irremediably  damage 

Some  unfair  clauses  are  also  hampering  a  wider 
uptake of faster forms of payments and e-payments 
(e.g.  factoring,  supply  chain  finance,  fintech 
companies). 

127.  PO3a puts forward appointing a payment envoy, based on similar solutions already 
in place in the Member States (e.g., France, Hungary, Slovakia) and in the UK (e.g. 
Small  Business Commissioner)89. The envoy would be an interface between the 
government  and  businesses  on  payment  delays  and  their  impact  on  SMEs.  The 
envoy could play an advisory role in the design of national policies and initiatives 
to combat late payments. They could play a role in raising awareness, providing 
information  and  education,  and  promoting,  where  available,  national  prompt 
payment  codes.  They  could  be  a  central  point  for  collecting  data  on  payment 
performance. By ensuring confidentiality to the victims of late payment, the envoy 
could  gather  intelligence  about  unfair  payment  practices90.  Although  the  envoy 

89 Economisti Study 2022. In France, in 2021, 70% of cases submitted to the “Médiateur des entreprises” 
resulted  in  a  fully  satisfactory  solution  for  both  parties.  Almost  60%  of  cases  referred  to  the  Médiateur 
concern  payment  disputes.  Average  time  of  resolution  of  a  dispute:  2  months.  The  UK  Small  Business 
Commissioner  helped  release  GBP  8  million  in  contested  payments  owed  to  SMEs.  Average  time  of 
resolution of complaints: 17 days. 
90 Stakeholders and SME representatives report that their SME members are very reluctant to complain about 
the unfair payment clauses or practices they are confronted with, out of fear of damaging business relations. 

36 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
would not be tasked with solving disputes or issuing administrative fines, Member 
States could decide to empower the envoy with these competences.  

128.  PO3b provides for setting up a national system of mediation. Recital 34 of the LPD 
requires Member States to encourage recourse to mediation or other means of ADR 
and quotes the Mediation Directive (2008/59/EC)91. The 2019 EP Resolution calls 
on  Member  States  to  set  up  national  and/or  regional  ‘free  and  confidential’ 
mediation  services  ‘accessible  to  all  companies,  as  an  alternative  to  court 
proceedings,  to  resolve  payment  disputes  and  maintain  business  relations’.  The 
resolution also calls for the ‘public funding of independent ombudsmen responsible 
for  investigating  late  payment  and  non-payment  disputes,  assisting  small 
businesses in resolving late payment and non-payment disputes, advising on action 
in  the  event  of  payment  arrears  and  recommending  solutions,  particularly  to 
SMEs’. 

129.  PO3a and PO3b put forward a proposal to Member States to specifically address 
the  question  of  unfair  contractual  terms  and  practices  through  their  applicable 
national law. This should avoid the risk of circumvention of the stricter new rules 
as  result  of  unfair  contractual  terms  or  practices  introduced  for  example  by  the 
stronger party in a contractual relationship. According to this approach, Member 
States  would  be  required  in  the  new  legal  instrument  to  provide  for  specific 
solutions preventing such circumvention. 

130.  The  specific  relationship  between  the  LPD  and  the  UTP  might  require  better 
clarification. This could be done either through a revision of the UTP Directive or, 
alternatively,  in  the  context  of  the  revision  of  the  LPD,  without  prejudice  to  all 
relevant legal considerations regarding, for example, the legal base or the choice of 
legal  instrument.  Provided    that  this  clarification  within  the  context  of  the  LPD 
revision    is  legally  feasible,  this  could  be  presented  as  follows  in  the  new  legal 
instrument:   

1)  The  application  of  the  revised  legal  text  (lex  generalis)  to  those  commercial 
transactions for the supply of agri-food products which do not fall within the scope of 
the UTP directive. In particular, the UTP directive, in its Article 1 (2), excludes from 
the  scope  of  the  UTP  directive  commercial  transactions  for  the  supply  of  agri-food 
products between buyers and suppliers operating within the same “bracket” (e.g. within 
the  brackets  identified  in  letters  from  a)  to  e)  of  article  1.2  of  the  UTP  Directive). 
Therefore,  any  of  the  PO1  and  sub-options  might    clarify  that  payments  for  these 
specific transactions would fall within the scope of the new revised legal instrument 
(lex generalis). 

91 Economisti Study 2022. Currently the use of mediation for resolving payment disputes is limited due to 
the heterogeneous implementation of the Mediation Directive in the EU. In Belgium, mediation is 
compulsory for disputes whose value does not exceed EUR 5 000, in Italy it is compulsory in inheritance 
matters, condominiums matters, and other subjects except commercial transactions. In complex contracts 
the necessary skills to solve payment disputes are often unavailable. For example, in construction projects, 
the mediator often has to have both technical and legal knowledge.   

37 

 
 
 
 
2)  To ensure maximum coherence, it might be clarified that the new maximum capping 
option under PO1b would be without prejudice to the commercial transactions falling 
within the scope of the UTP, with the exception of the payment period applicable to 
the supply of non-perishable food products, which are currently subject to a 60-days 
cap under the UTP Directive. Moreover, the maximum cap of payment periods at 30 
days (PO1a) in the revised legal instrument should be in any case without prejudice to 
the  specific  rules  applicable  in  the  agri-food  sector  to  value  sharing  agreements, 
payments in the context of the school scheme, and to certain payments in the must and 
wine sector92.  

3)  The revised Directive or the new Regulation might also lay down an obligation aimed 
at ensuring cooperation and coordination between the enforcement authorities that are 
already  in  place  as  a  result  of  the  transposition  and  implementation  of  the  UTP 
Directive and the enforcement authorities that will be set up as a result of the revision 
of the LPD (see PO2). 

5.3 

Form of the legal act 

131.  Regarding the choice of instrument, the options are adopting a regulation (option 
1) or keeping the same legal instrument by revising the current directive (option 2). 

132.  The two options show some key differences. 

133. 

In  the  case  of  the  first  option,  where  a  regulation  would  repeal  and  replace  the 
current directive, the provisions of the future act would be drafted in such a way 
that they are directly applicable. Such provisions would be directly applicable in 
all  Member  States  since  its  entry  into  force.  While  national  law  would  need  to 
adjust to the EU regulation, there would be no need for a transposition. A regulation 
would be binding and the same rules would apply in all Member States. This could 
happen in particular as regards measures such as the setting of maximum payment 
terms,  the  duration  of  the  verification  procedures  or  the  rate  of  late  payment 
interests and the amount of the flat fee compensation. The regulation would also 
need  to  introduce  directly  applicable  provisions  regarding  requirements  to 
contractors  to  provide  evidence  on  payments  to  subcontractors  in  public 
procurement  works  (see  for  more  detail  Option  2a).  Possibly  certain  specific 
provisions  could  explicitly  allow  Member  States  to  adopt  more  stringent 
provisions, where this is carefully calibrated so as to allow operators and national 
authorities to clearly know which provisions apply. As a minimum harmonisation 
instrument,  the  regulation  would  also  lay  down  obligations  and  definitions 
concerning  the  designation  of  national  enforcement  bodies,  national  mediation 
systems, credit management and financial literacy training and unfair contractual 
practices  and  provisions,  but  it  would  be  for  the  Member  States  to  complement 
them  as  these  provisions  might  not  be  directly  applicable.  The  new  regulation 
would also incorporate the existing provisions of the LPD which are not touched 
upon by the existing revision and which do not need to be revised. 

92 These are specific exceptions already laid down in the UTP Directive 

38 

 
 
 
134. 

In the case of the second option, where a directive would amend the existing LPD, 
the new legal instrument would limit itself to introducing the measures identified 
in  the  preferred  option  (see  section  8)  as  amendments  to  the  existing  directive. 
Member States would then need to transpose the amended Directive into national 
law. Member States will still be allowed to either maintain or introduce measures 
that  are  more  favourable  to  the  creditor  (e.g.  shorter  payment  terms,  or  specific 
payment terms for identified sectors, or higher rates of late payment interests and 
flat fee compensation). 

135.  An assessment of the costs and benefits of each choice of legal form is applied to 

the preferred option in section 8. 

5.4  Measures discarded at an early stage  

136.  The following policy measures were considered but discarded (reasoning in Annex 

14):  

1)  making e-invoicing mandatory; notably due to the current Commission proposal COM 
(2022) 701 (dynamic baseline scenario) which already addresses this goal (Annex 22); 
2)  offsetting  credits  owed  by  the  public  authorities  with  debts  owed  to  the  public 
authorities  (income  taxes,  local  taxes);  the  LPD’s  legal  base  is  not  adequate  and 
subsidiarity and competence issues would plead against such a measure: direct taxation 
and local taxation do not fall under EU competence;  

3)  transparency obligations for businesses and public authorities: discarded for political 

feasibility reasons, as this would require reporting obligations;  

4)  fostering  synergies  with  public  procurement  by  obliging  contracting  authorities  to 
exclude  from  procurement  those  contractors  with  overall  bad  payment  performance 
towards their subcontractors: as this would require evidence difficult to provide and 
check, and would thus be burdensome for public authorities and for businesses; 

5)  in  G2B,  requiring  contracting  authorities  to  accelerate  payments  for  low  value 
contracts  beyond  the  current  provisions  of  the  LPD  and  not  requiring  verification 
procedures: as this would interfere with the subsidiarity and proportionality principles 
and with other existing EU law.  

6  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

137.  All policy options described above will have mainly economic impacts. The social 
and  environmental  impacts  are  not  assessed  separately  for  policy  options.  The 
impact  of  all  policy  options  is  described  both  qualitatively  and  quantitatively, 
where possible. The methodology for arriving at quantitative impacts is described 
in Annex 4.  

6.1  Economic impacts 

138.  All options will have significant economic impacts. Where the impacts differ per 
policy option, they are spelled out clearly. The policy options will have impacts on 
enterprises,  including  SMEs,  and  their  competitiveness,  as  well  as  on  public 

39 

 
 
 
authorities.  None  of  the  policy  options  entail  direct  impact  on  citizens  or 
consumers. The overall  effect  on the competitiveness  and a  proper and  efficient 
functioning of the single market is likely to indirectly affect consumers, helping to 
guarantee a wide choice of products and to ensure that supplies reach consumers at 
reasonable  prices.  Some  indirect  positive  impact  is  expected  on  consumers’ 
purchasing  power,  following  indirectly  from  the  likely  positive  impact  on 
employment. The overview of economic impacts is in Annex 25. 

6.1.1  Policy Option 1: Fix the framework conditions to prevent late payments 

6.1.1.1  Impacts on enterprises 

6.1.1.1.1  Benefits 

139.  PO1 focuses on ensuring that payment terms agreed between parties are fair. 

140.  Considering that currently 73% of all companies have been asked to accept higher 
payment terms than they are comfortable with, the capping of payment terms can 
bring  a  real  benefit  to  companies.  It  can  reduce  real  payment  times,  reduce 
negotiation  times  and  empower  particularly  smaller  businesses.  It  will  also 
facilitate enforcement. 

141.  Quantifying the effect of capped payment terms on actual payment times relies on 
some  estimations.  In  an  optimistic  scenario,  payment  times  will  tend  to  match 
payment terms. Under realistic scenario, some companies still pay after the agreed 
payment  term.  Currently,  in  every  EU  Member  State,  actual  payment  times  are 
higher than payment terms agreed (see section 2). To map this effect, we assume 
payment times to go down proportionally to the reduction of the payment term. A 
pessimistic scenario assumes the reduction in payment terms to have no effect on 
payment  times.  This  is  a  risk  of  PO1  in  isolation  because  it  includes  no  direct 
enforcement measures. However, evidence from the LPD suggests that the above-
mentioned  proportional  reduction  is  the  most  likely  even  when  PO1  is  a  self-
standing option. After the 2011 LPD introduced capping on payment terms in G2B 
transactions,  the  actual  payment  times  showed  a  significant  downward  trend. 
Payment delays by public authorities went down from 27.8 days in 2011 to 16.8 
days in 2022, a reduction in 40%93. 

142.  These assumptions bring the following reduction in payment duration for each sub-

option: 

1)  PO1a (Capping at 30 days): Taking current average payment terms in B2B transactions 
of 39.3 days and actual payment times of 52.6 days94 as a baseline, a 30 days capping 
will involve a reduction in payment terms for every EU company on average. In an 
optimistic scenario where payment times comply with the terms agreed, a 30-day cap 
would produce a reduction of 22.6 days of actual payment duration, or nearly 43%. In 
the realistic scenario of proportionally reduced payment times, a 30-day capping would 

93 EPR 2022 
94 EPR 2022 

40 

 
 
 
lead  to  actual  payment  duration  of  40.2  days,  down  by  12.4  days  or  23.5%  (or  a 
reduction in payment delays from 13.3 days to 10.2 days, a reduction of 23.4%) – see 
Annex 4.  

2)  PO1b  (Capping  at  60  days):  As  current  average  payment  terms  and  times  in  B2B 
transactions are already below 60 days, this option would not necessarily bring down 
the payment terms for the average EU company. Instead, this option would target only 
excessively long payment terms. Therefore, the benefits of this option are significantly 
lower than the option of capping at 30 days, but it would imply substantial benefits for 
a subset of companies. Estimating from the European Payment Report, currently 14.4% 
of all companies specify payment terms above 60 days95. While there is no precise data 
on how much payment delays this specific subset of companies faces, the JRC study 
on  the  economic  impact  of  faster  payments  suggests  that  companies  that  were 
collecting payments in more than 60 days, on average, show a 10% increase in cash 
flow four years after the enactment of the LPD96. 

3)  PO1c (Capping at 60 days where the creditor is an SME): The benefits of this option 
are similar to the option of capping at 60 days (PO1b), but will affect a smaller subset 
of invoices. Calculating from the number of companies per size class and the average 
number of invoices issued by size class, we can estimate 66% of all invoices being 
issued by an SME97. This sub-option would therefore affect 66% of the invoices of the 
above-mentioned 14.4% of all companies. 

143.  Stakeholders largely support capping payment terms. The results are most clear in 
the SME panel, where 83% of SMEs support a cap on payment terms. SMEs are 
more split about the level for this cap: 36% support a cap at 30 days (up to 44% 
among  micro-companies  and  self-employed),  28%  support  60  days  (up  to  36% 
among small companies) and 17% support 45 days instead.  

144.  PC also shows broad stakeholder support for setting a maximum payment term in 
B2B  transactions  (59%  in  total,  and  the  most  popular  option  for  each  type  of 
respondents,  such  as  business  associations,  public  authorities  and  individual 
businesses). However, the most popular options in the PC for payment terms are 
either to remain as they are (29%) or to be capped at 30 days (27%). The option of 
60 days finds support of only 9.4% of respondents. Several stakeholders proposing 
‘Other options’, express aversion to limiting freedom of contract. This suggests that 
those stakeholders who wish to see freedom of contract retained want to keep things 
as they are; whereas if the freedom of contract is restricted in any way, it should be 
used for the most effective option, hence the cap at 30 days. 

95 While this estimation is based on the EPR, the results from the SME Panels confirm this: 14.5% of all 
SMEs said they specify payment terms above 60 days. 
96 JRC study 2022  
97  This  estimation  is  an  approximation  as  it  does  not  take  into  account  whether  the  invoices  with  long 
payment terms are more likely to be issued by an SME. However, according to the European Payment Report, 
there are relatively small differences between SMEs and large companies when setting long payment terms, 
so this approximation probably holds. 

41 

 
 
 
145.  PO1c  finds  little  support  overall,  with  only  2.5%  of  stakeholders  in  favour  of 
limiting payment terms to 60 days only in transactions between large companies 
and  SMEs.  The  only  support  to  this  option  came  from  a  few  small  business 
associations and individual EU citizens in the public consultation; no companies or 
public authorities expressly supported this option in the consultation. 

146. 

In  this  option  we  have  also  analysed  a  potential  alternative  for  exceptions  for 
specific sectors. Introducing a sectoral approach finds relatively little favour among 
stakeholders  (4.2%  in  the  PC,  and  12%  of  SMEs  in  the  SME  panel).  Some 
stakeholders  from  retail,  wholesale  and  textile  sectors  express  opposition  to 
uniform payment terms. According to these stakeholders, maximum payment terms 
should not be enforced in sectors with strong seasonality (e.g. textile), and capped 
payment terms would harm smaller companies who rely on long payment terms 
and  would  find  it  difficult  to  access  financing  otherwise  (retail).  Such  sector 
specificities could be addressed more adequately by sector-specific funding options 
from finance providers than by supplier credit. 

147.  We have assessed these arguments carefully. There is some evidence for certain 
sectors that routinely specify longer payment terms. Although the average payment 
term specified is fairly similar across most sectors, ranging from 37 to 42 days98, 
among those companies pertaining to none of the listed sectors in the Intrum survey 
(‘Other’ sector), payment terms are significantly higher, at 59 days. 

148.  Business  associations  representing  exclusively  SMEs  specifically  argue  against 
longer payment terms for large retailers or the construction sector. Arguments for 
the retail and textile sector should be weighted against the fact that sales in these 
sectors  are  made  for  cash.  SME  panel  respondents  do  not  support  a  sectoral 
approach either. Sectors with the highest number of replies are listed in the table 
below.  ‘It  is  necessary  to  establish  exceptions  for  certain  sectors  due  to  the 
specificity of the supply chain or of the market’ or ‘I do not agree with a maximum 
payment term’ is the preferred option for none of the sectors. 

SME panel – sectoral preferences for capping: 

30 days 

60 days 

Manufacturing 

Construction 

Other service activities 

Wholesale and retail 

Professional, scientific and technical activities 

Mining and quarrying 

Total across all sectors 

22% 

39% 

41% 

38% 

49% 

27% 

36% 

35% 

30% 

27% 

30% 

18% 

42% 

28% 

149.  However,  against  this  it  is  important  to  weigh  the  cost  of  specifying  different 
payment caps per sector or exempting certain sectors entirely, which will be further 
detailed under the section 6.1.1.1.2 on costs. 

98 Intrum, European Payment Report 2022 

42 

 
 
 
150.  PO1a,  PO1b  and  PO1c  contain  the  capping  of  the  verification  or  acceptance 
procedure at 30 days, without exception. This aims to prevent debtors from using 
long  verification  procedures  to  circumvent  the  maximum  payment  terms.  SME 
panel shows that 66% of respondents have faced this practice. There is no data how 
widespread  the  practice  is.  One  business  association  responding  to  the  PC 
described the problem as ‘unfortunately very common’. Capping this practice is 
therefore likely to further reduce actual payment duration, even if this cannot be 
easily quantified. 

151. 

In addition to the direct reduction in payment terms, capping payment terms will 
lead to reductions of other costs for businesses, mainly for reducing the time needed 
for negotiating payment terms (41% of SMEs negotiate payment conditions on a 
case-by-case basis), saved costs due to less chasing of late payments, and a stronger 
market  position  for  those  enterprises  (often  smaller  ones)  which  are  currently 
forced into terms they are uncomfortable with. The reduction in enforcement cost 
on companies from chasing fewer payments, for example, can be significant. The 
number of person-days per year a company spends on chasing late payments has 
been estimated from 5 days in Germany to more than 15 days in Spain99. Even if 
we only assume 5 days per year, under the above-mentioned expected reduction in 
late payments of 23.4%, a total of 227.4 million man-hours could be saved per year 
for the EU-27 economy. This would be a significant recurring  enforcement cost 
saving of EUR 5 845,4 million. 

152.  Other of these effects are difficult to quantify but have the potential to strengthen 
the fairness of the EU economy, contributing to sustainable competitiveness. This 
is  clearest  in  negotiations;  where  companies  are  currently  forced  to  negotiate 
payment  terms  longer  than  they  are  comfortable  with,  when  payment  terms  are 
capped  the  scope  for  negotiation  and  imposition  of  unfairly  long  terms  by  the 
dominant partner is severely limited. As parties will continue to be free to negotiate 
their contracts below the maximum payment terms, negotiation times will only be 
affected for companies that currently negotiate above the maximum payment terms, 
and companies that will align their payment terms to the new maximum instead of 
negotiating case-by-case. Parties will not be able to negotiate longer payment terms 
than defined in the maximum cap depending on the sub-option. 

153.  These benefits differ depending on the option chosen. PO1a (Capping at 30 days) 
will reduce negotiation times for every EU company on average. We assume that 
the SMEs that are currently paid within 30 days (44%) and that currently negotiate 
on a case-by-case basis (35%) might partially cease to do so and align to 30 days 
(conservatively  50%  of  those),  therefore  8%  of  SMEs  would  see  a  reduction  in 
negotiation time. In addition, for SMEs that are currently paid beyond 30 days and 
that were doing so based on negotiation, the capping would as well get rid of the 
negotiation  part  for  100%  of  them.  This  applies  to  the  45%  of  SMEs  that  are 
currently paid beyond 30 days (56% from SME panel): a total of 25% of SMEs. 

99  https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-
Research-Sage.pdf 

43 

 
 
 
Taking  these  two  cases  together,  overall,  the  avoidance  of  negotiation  should 
benefit around 33% of SMEs. 

154.  PO1b (capping at 60 days) will only benefit the 14.4% of companies most affected 
by  excessively  long  payment  terms,  and  PO1c  (capping  at  60  days  where  the 
creditor  is  an  SME)  will  only  benefit  66%  of  negotiations  conducted  by  these 
14.4% of companies. 

155.  Besides the direct savings in terms of cost and time, there are other unquantifiable 
effects  on  businesses.  Enterprises,  particularly  small  market  players,  are 
empowered to make more informed decisions when signing a contract. They know 
what payment terms to expect regardless of the size or market position of the other 
party. 

156.  Companies will also be able to benefit from the horizontal measures provided for 
in this PO. Access to credit management and digital financial literacy trainings can 
provide a direct benefit to SMEs, with the value of such trainings currently ranging 
between EUR 200 and EUR 1 800. It is left up to Member States to design the most 
suitable  form  of  making  available  this  training  to  SMEs,  in  line  with  existing 
provisions  on  state  aid.  This  measure  has  found  near-universal  support  in  the 
stakeholder consultation: 73% of stakeholders support it, and it is the only measure 
not to receive a negative response. This support is widespread across all types of 
respondents, including business associations, public authorities and companies. 

6.1.1.1.2  Costs 

157.  PO1 will impose some costs on businesses, particularly debtors. 

158.  Businesses that use long standard payment terms (either as their preferred or forced 
choice) will have to update their standard payment terms on invoices. This would 
only  apply  to  those  companies  that  do  not  negotiate  on  a  case-by-case  basis,  as 
these  companies  currently  do  not  use  a  standard  template.  The  related  one-off 
adjustment cost is relatively limited per company: updating standard terms is likely 
the same cost as processing a paper invoice (estimated by the ECB100 at EUR 2.50 
– 10.00), however it will only need to be done once to adapt the template. Although 
a small cost per company, this will affect a large number of companies depending 
on the sub-option chosen. 

1)  PO1a  (Capping  at  30  days)  will  affect  all  companies  currently  specifying  payment 
terms longer than 30 days. According to EPR 2022, 42% of all companies currently do 
so (and this is broadly in line with the finding from the SME panel that 56% of SMEs 
currently do so). Excluding cases where this is the result of case-by-case negotiations 
(45% of SMEs according to the SME panel), this only applies to the companies where 
the  payment  terms  longer  than  30  days  are  the  result  of  imposing  own  payment 
conditions  (23% of SMEs), being  imposed payment conditions  (21%) or finally the 
result of sectoral standard practice (11%). Therefore, the one-off cost is assumed to be 
borne by 55% of SMEs that are currently paid beyond 30 days (42% of all companies): 

100 https://www.ecb.europa.eu/paym/intro/mip-online/2016/html/mip_qr_1_article_4_e-invoicing.en.html  

44 

 
 
 
around 23% of companies. Conservatively assuming the top end of the ECB range, this 
would impose a total one-off adjustment cost of EUR 56.1 million. 

2)  PO1b  (Capping  at  60  days)  would  only  affect  the  14.4%  of  companies  specifying 
payment  terms  longer  than  60  days.  The  total  one-off  adjustment  cost  would  be 
EUR 35.0 million. 

3)  PO1c (Capping at 60 days where the creditor is an SME) would only affect 66% of the 
invoices under the previous option. The total one-off adjustment cost can be estimated 
at  EUR 23.1  million.  However,  an  additional  one-off  administrative  cost  related  to 
verification for a creditor may be required if the debtor wishes to verify that the creditor 
is an SME. The evaluation of the SME Definition estimates this cost at 6.5 person-
hours per SME to collect and provide information to prove their SME status101. Even 
assuming every SME would only have to prove it once already leads to an estimate of 
15  million  person-hours  spent,  or  EUR 384  million  assuming  average  EU  hourly 
cost102. This verification cost therefore makes PO1c the costliest of the three choices 
under PO1, despite affecting only a relatively small subset of companies. 

159. 

160. 

In the alternative consideration in PO1a for setting different caps for certain sectors 
or  exempting  certain  sectors  entirely,  companies  that  wish  to  set  long  payment 
terms  would  face  an  additional  one-off  administrative  cost  of  proving  that  they 
belong to a certain sector. This usually entails providing an extract from company 
register,  which  companies  obtain  on  a  regular  basis  for  different  business 
operations. This cost is largely considered as business as usual and its magnitude 
is insignificant. 

In  addition  to  the  one-off  costs  specified  above,  debtors  are  likely  to  face 
consequences for their business operations. As late payments are a form of hassle-
free  credit,  any  reduction  in  payment  duration  will  force  the  debtor  to  seek 
additional financing to meet the new payment terms. This will entail both one-off 
cost of dealing with the bank and recurring costs related to interests. However, the 
net  interest  costs  of  the  new  financing  would  likely  be  favourable  to  the  debtor 
because the interest implicitly included in the prices of goods or services currently 
purchased on supplier credit is likely higher (see section 2.3). In addition, the need 
for additional financing is likely to be limited, because the debtors will benefit from 
being  paid  on  time  themselves.  65%  of  all  respondents  in  the  PC  gave  ‘Late 
payments are a vicious circle (a company is paid late and then pays late in return)’ 
as the top reason for late payments. This indicates that if debtors themselves are 
paid on time, they will find it easier to meet the payment terms to their creditors. 

161.  However, some debtors, including SMEs, deliberately rely on late payments at the 
moment to finance themselves with almost-interest-free credit. These debtors could 
face a recurring cost if they were unable to use this credit. The cost of this is hard 
to  estimate  because  few  companies  openly  state  this  as  a  reason  for  their  late 
payments. An impact assessment on late payments by the Australian government 

101 https://ec.europa.eu/transparency/documents-register/detail?ref=SWD(2021)279&lang=en  
102 Average EU-27 hourly labour rate of EUR 25.70, applied under the OIOO approach 

45 

 
 
 
may provide some indication103. This impact assessment estimates that annual trade 
credit  from  small  to  large  businesses  amounts  to  $AUD 216  billion.  Converting 
this to EUR and extrapolating to the size of the EU economy, we can estimate a 
EUR 1.34  trillion  trade  credit  from  small  to  large  businesses  in  the  EU.  Even 
assuming the above figure of 65% of late payments only being due to  a vicious 
circle, if the remaining trade credit will have to be borrowed at market rates, debtors 
may still face a financing cost of tens of billions of euros per year. Yet this effect 
is not a net cost because the reasoning does not consider that debtors are already 
paying an implicit interest on supplier credit. The debtor currently only avoids the 
need for this financing by forcing its suppliers to cover the financing cost instead. 
Seeing  that  interest  rates  for  large  businesses  are  usually  lower  than  for  small 
business, the same Australian impact assessment has found that despite the costs 
for debtors, there will be a sizeable net benefit to the Australian economy of $AUD 
313 million per year. 

162.  Besides  the  monetary  net  benefits,  this  is  also  a  question  of  sustainable 
competitiveness and fairness. While it may impose a financial cost on a debtor to 
pay their suppliers on time, this is preferable to the debtor imposing those financial 
costs on its suppliers. Even if the cost-benefit were exactly neutral, the fairer option 
would still be preferable. 

163.  Some indirect effects could arise from the measure to facilitate SMEs’ access to 
credit management and financial literacy training. Commercial providers of such 
training  courses  may  find  a  distorted  playing  field  if  Member  States  provide  or 
subsidise such courses. This risk is reduced if Member States focus on providing 
access to commercially  provided courses to SMEs (e.g. by subsiding part of the 
participation fees). 

6.1.1.2  Impacts on SMEs and competitiveness 

164.  PO1 will have impacts on SMEs and the economy’s competitiveness. All measures 
target either all companies or specifically SMEs (e.g. PO1c). No exclusion of scope 
for any measures is planned. 

165.  The initiative should strengthen overall competitiveness.  Although  reducing late 
payments may bring costs to debtors while providing benefits to creditors, the net 
effect of this is not zero-sum, but a measurable economic benefit. On average, the 
effect of the on aggregate cash flow amounts to a 0.9% increase for each differential 
day.  This  effect  is  more  marked  in  the  manufacturing  and  construction  sectors, 
characterized by a strong presence of SMEs in the relevant supply chains104. There 
is  also  an  unquantifiable  benefit  of  reducing  uncertainty  and  making  business 
environment more predictable. 

103 https://oia.pmc.gov.au/sites/default/files/posts/2020/05/payment_times_reporting_scheme_ris.pdf  
104 Assessing the economic impact of faster payments in B2B commercial transactions. Final Report, JRC 
Study https://publications.jrc.ec.europa.eu/repository/handle/JRC130205  

46 

 
 
 
166.  Therefore, the effect on price/cost competitiveness and innovation competitiveness 
is expected to be positive. With an increased aggregate cash flow in the economy, 
enterprises have more liquidity to invest in innovation or to pass cost reductions to 
consumers.  Doing  business  is  more  predictable,  and  fairer,  with  every  business 
paying  for the liquidity  they need and use. Cost  of funding goes  down, because 
banks  directly  fund  the risks of their clients, which they understand well, rather 
than indirectly finance the unknown risk carried by their customers. 

167.  On international competitiveness, there is some risk that non-EU companies that 
are not bound by maximum payment terms can undercut EU companies by offering 
long payment terms. However, the effect of this is estimated to be limited. Firstly, 
this effect will likely be cancelling itself between import and export transactions. 
Secondly, many non-EU countries such as Canada, the US, Türkiye and the UK 
already impose legislation on late payments  as well.  Thirdly, this effect has  not 
really been visible within the EU, where some countries such as the Netherlands 
have  imposed  stricter  legislation  on  payments  than  others.  In  terms  of  SME 
competitiveness,  impacts  on  SMEs  are  likely  to  be  more  positive  than  for  large 
enterprises. As stated in the problem definition, large enterprises are more likely 
than SMEs  to  pay late. Large enterprises are therefore somewhat  more likely  to 
bear the costs identified in this policy option, whereas SMEs are more likely to see 
the benefit.  

168.  SMEs strongly support the measures identified above, more than the respondents 
to the PC, where a clear comparison is possible. For example, on capping payment 
terms, SMEs strongly support a maximum payment term (82%), whereas 59% of 
stakeholders in the PC support this measure. All measures under this option receive 
either majority or at least plurality support among stakeholders and SMEs alike. 
This  indicates  that  thanks  to  the  identified  ‘virtuous  circle’  of  prompt  payments 
flowing up the supply chain, all businesses will ultimately see an improvement to 
their cash flow and to their competitiveness. 

6.1.1.3  Impact on public authorities 

6.1.1.3.1  Benefits 

169.  Benefits  to  public  authorities  in  PO1  are  limited.  No  particular  cost  savings  are 

identified. 

170. 

Indirect  effects on public authorities’ budget  can be significant. Considering the 
impact of late payment on bankruptcies and employment, reducing late payment 
(by more than 23% under PO1a) could provide significant savings on public budget 
through higher tax revenue and reduced unemployment benefits. 

6.1.1.3.2  Costs 

171.  PO1’s costs to public authorities are relatively limited. Since the main measures 
concern the setting of payment terms in B2B transactions, public authorities do not 
have a direct cost to implement this measure.  

47 

 
 
172. 

In the 2015 evaluation of the LPD, Member States found the administrative costs 
associated  with  maximum  payment  terms  to  be  negligible:  ‘All  costs  to  public 
authorities  as  a  result  of  the  Directive  are  one-off  and,  on  the  whole,  they  are 
considered marginal by the authorities themselves’105. 

173.  Verifying  purchases  within 30 days  may require public authorities to  streamline 
verification procedures. This is not a big change as the purchases must be verified 
anyway.  

174.  Providing  access  to  SMEs  to  credit  management  and  financial  literacy  training 
involves some adjustment cost for public authorities. The precise cost will depend 
on  how  Member  States  will  structure  their  support,  ranging  from  promotional 
campaigns to fully subsidising courses for SMEs in compliance with state aid rules. 
A full estimate of the cost can therefore not be given in monetary terms. 

6.1.2  Policy Option 2: Foster timely payments 

6.1.2.1  Impact on enterprises 

6.1.2.1.1  Benefits 

175.  Under PO2, the impact on businesses is mainly a ‘double-edged sword’. Increased 
compensation and its legally automatic payment will bring significant benefits to 
creditors  who  are  paid  late  and  help  them  pay  their  own  debts  on  time.  These 
benefits  to  creditors  are  a  direct  cost  to  their  debtors  who  pay  compensation. 
Debtors are likely to want to avoid paying this cost, either by paying on time or by 
avoiding their obligation to pay. 

176.  There are therefore, for both PO2a and PO2b, two extreme scenarios that we can 
assess:  (i) no  change in  late payments  and a substantial cost  on debtors  directly 
translating into a substantial benefit for creditors; and (ii) a full-scale change of all 
debtors  paying  on  time  to  avoid  paying  interest  and  compensation  fees. 
Realistically, neither scenario is  going  to  play out  100%, but  they are presented 
here as extreme cases for purposes of quantification, followed by a conservative 
estimate for a realistic scenario. 

177.  Making  payment  of  compensation  legally  automatic  would  imply  a  substantial 
impact. Currently, creditors have to ask for the compensatory interest to be paid, 
and often avoid doing so for fear of jeopardising the business relationship. 54% of 
companies,  even  those  familiar  with  the  entitlement  to  compensation  under  the 
LPD,  say  they  never  ask  for  it,  and  a  further  26%  only  sometimes  ask  for  the 
compensation106.  SME  panel  paints  an  even  starker  picture,  with  80%  never 
receiving  interest  or  compensation,  8.5%  rarely  and  only  1%  often.  Even  under 
legally  automatic  payment,  it  would  be  unrealistic  to  assume  100%  of 

105 Ex-Post Evaluation 2015 
106 European Commission based on EPR 2022 data 

48 

 
 
 
compensation to be paid. Companies may still not seek redress if their debtor does 
not pay interest or compensation fees. 

178.  Yet  even  under  very  conservative  assumptions,  automatic  payment  of  the 
compensation interest (ECB rate + 8%) would provide significant benefits of EUR 
265.5  million  to  creditors.  SME  panel  replies  indicate  that  8.5%  companies 
currently rarely receive compensation. A conservative assumption that half of them 
would receive their claims for compensation more regularly, would represent an 
increase in 4.25% of companies. We round 4.25% up to 5% assuming that this is 
the  share  of  compensation  interest  successfully  paid  out.  We  take  the  value  of 
unpaid turnover (as assumed in the Impact Assessment 2009, at EUR 1 864 billion; 
the value has likely changed but still serves to provide an order of magnitude107) as 
the  basis  for  calculation  of  interest.  We  conservatively  assume  interest  rate  at 
8%108, and take the average delay of 13 days. See Annex 4.  

179.  PO2a and PO2b imply significant benefits to creditors from direct compensation 
fees. The share of invoices not paid on time varies significantly by Member State. 
However, assuming the best actual performance (i.e. Denmark, where in 2021 90% 
of  payments  were  made  on  time109)  would  lead  to  the  compensation  fees  to  be 
applied  to  a  total  of  10%  of  the  15  billion  B2B  and  G2B  invoices  every  year. 
Assuming conservatively that only an extra 5% of companies will receive the flat 
fees once their payment is made automatic, we can see what a sizeable impact the 
consistent application of compensation fees would have (see Annex 4). 

1)  PO2a (adjusting EUR 40 flat fee to inflation): Adapting the flat fee to inflation (based 
on Eurostat HICP comparing 2022 to 2011) would lead to a new flat fee of 50 euros. 
The total benefit to the additional 5% of companies receiving the flat fee would equal 
EUR 3.75  billion.  Those  companies  that  already  ask  for  the  compensation  fees 
currently would still obtain the EUR 10 extra per late invoice. 

2)  PO2b (EUR 40-100 depending on invoice volume): Total benefit to the additional 5% 
of companies receiving the compensation fee of EUR 3 billion – 7.5 billion, depending 
on volume of invoices. The companies who already claim compensation fees currently 
would still benefit from the increase depending on invoice volume. 

180.  These  benefits  would  be  a  direct  cost  for  the  debtors  who  pay  the  interest  and 
compensation fees. Many debtors would therefore try to avoid paying the interest 
and compensation fees by reducing their payment times. As a negative effect, in 
those countries which currently do not impose a maximum payment term, debtors 
might  purposely  negotiate particularly long  payment  terms in  order to  minimise 

107 B2B and G2B. Total amount of late payments has gone down since Impact Assessment 2009, but total 
turnover has increased. For an order-of-magnitude estimate, this is therefore still a reasonable assumption. 
108 Our conservative estimate assumes the minimum possible interest rate of 8%, which was in place for 
much of the past decade. The current rate equals 10.5%.  
109  D&B  Payment  Practices,  2022  -  https://www.dnb.com/en-ch/knowledge/study/payment-study-2022-
download/  

49 

 
 
 
chances of paying late. This would reduce ‘late’ payments as such, but at the cost 
of introducing unfairly long payment terms. 

181.  However, the benefit to businesses is clearer when looking at G2B payments. These 
already have maximum payment terms under the LPD. Governments are therefore 
more likely to pay on time and avoid compensation (interest and fees), similar to 
the effects after the LPD’s entry into force. Payment delays by public authorities 
went down from 27.8 days in 2011 to 16.8 days in 2022, a reduction of 40% (which 
includes the spike in payment delays in recent years)110. Assuming a similar effect 
from  automatic  interest  rates  and  increased  compensation  fees,  a  further  40% 
reduction to 10.1 days is possible. 

182.  The main benefit of this policy option, in the absence of a cap on payment terms, 
would  therefore  be  a  reduction  in  late  payments  by  public  authorities.  In  B2B 
payments,  late  payments  are  also  likely  to  go  down,  but  the  risk  of  companies 
negotiating  unfairly  long  payment  terms  is  likely  to  limit  the  effect  on  actual 
payment times. 

183.  The SME panel reveals that in 80% of cases interest and the compensation fee are 
never automatically paid and they are rarely paid in 8% of cases. 15% of medium-
sized  companies  replied  that  they  rarely  receive  interest  and  compensation 
compared to 8% for SMEs on average.  

184. 

In the SME panel, 77% of SMEs support banning practices and clauses that oblige 
creditors  to  waive  their  rights  to  late  payment  interest  and  compensation  in 
exchange for immediate payment. This action is most supported by micros (80%). 

185.  Debtors are likely to try to avoid paying compensation in other ways too, e.g. by 
refusing to pay or threatening the business relationship. Particularly smaller players 
will  find  it  difficult  to  enforce  their  claims  by  themselves.  Enforcement  of  the 
correct application of interest and compensation fees needs to be done centrally by 
the Member States. Hence, this policy option puts forward enforcement bodies by 
Member States. 

186.  Most  stakeholders  (see  Annex  2)  are  positive  towards  setting  up  enforcement 
bodies.  There  is  no  significant  difference  between  enforcement  bodies  with 
sanctions power (PO2a) and those without (PO2b) (47% vs. 50%), The share of 
negative  responses  is  similar  for  both  (18%),  which  suggests  that  the  minority 
opposition mainly comes from the cost to designating an enforcement body in the 
first  place.  The  negative  responses  mainly  come  from  business  associations  and 
public authorities, with few negative responses from companies themselves. 

187. 

In the SME Panel, businesses were even more supportive of enforcement bodies. 
84%  of  SMEs  found  this  useful  or  very  useful.  For  this  action,  no  significant 
difference is found by size of companies or by size of debtor that mostly pay late. 

110 EPR 2022 

50 

 
 
 
1)  PO2a (enforcement bodies empowered to issue administrative sanctions and publish 
the  name  of  offenders):  Such  bodies  would  have  the  power  to  impose  fines  and 
sanctions on non-complying firms. In practice, fines would usually follow warnings, 
but warnings by an enforcement body will be more effective when accompanied by the 
threat of a fine. While it is hard to estimate to what precise reduction in late payments 
an enforcement body such as this can lead, there is an illustrative example from France. 
It is estimated that, since the introduction of the enforcement body in France, average 
payment delays have gone down  from  13.6 days to  11.2 days111, i.e. a reduction of 
17.8%. While a clear causality is difficult to prove, it provides some estimates as to the 
effects of stronger enforcement. 

2)  PO2b (enforcement bodies responsible for monitoring implementation): Enforcement 
bodies could be implemented without sanctioning powers. This would save costs for 
public authorities but would reduce benefits for businesses that are paid late because 
the deterrent effect would be much lower here than in PO2a. 

188. 

In addition, PO2 focuses on public authorities setting good examples in payment 
behaviour,  by  ensuring  that  subcontractors  in  public  tenders  are  paid  promptly 
(which 57% of respondents, including business associations and direct responses 
from businesses, supported in the PC). This could bring benefits to businesses in 
public procurement procedures and make it more attractive for SMEs to participate 
in public tenders. Precise estimates are difficult to quantify, but the example of the 
UK  shows  that  this  policy  led  to  an  unblocking  of  GB 7.5  million  over  three 
years112. Converting this to euros and extrapolating to the EU-27, this could lead to 
unblocked payments of EUR 31 million per year. 

189.  This measure is focused on the construction sector because payment delays in the 
construction  industry  are  systemic,  largely  because  of  the  construction  pyramid. 
The  complex  structures  of  contracting  and  subcontracting  set  the  construction 
industry apart from almost all other industries. For the vast majority of projects, the 
prime  contractor  will  subcontract  various  segments  of  the  project  to  specialized 
trade contractors. These trade contractors often perform upwards of 80%113, 
and sometimes more, of the actual work on the project. 

190.  As  in  PO1,  these  measures  together  could  lead  to  a  sizeable  reduction  in 
enforcement cost for companies through reducing their cost of chasing late payers. 
Assuming the same number of 5 man-days per year as in PO1114, under an expected 
reduction  in  late  payments  of  17.8%,  a  total  of  21.6  million  man-days  could  be 
saved per year for the EU-27 economy. This would be a significant recurring cost 
saving of 173 million man-hours. 

111 https://www.senat.fr/questions/base/2018/qSEQ181007212.html  
112 https://www.gov.uk/guidance/prompt-payment-policy 
113 https://www.tpsgc-pwgsc.gc.ca/biens-property/divulgation-disclosure/psdic-ppci-eng.html 
114 https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-
Research-Sage.pdf 

51 

 
 
 
191.  Taken  together,  the  deterrent  from  the  interest  rates  and  compensation  fees 
combined  with  enforcement  bodies  and  ensuring  prompt  payment  in  public 
contracts  could  therefore  lead  to  a  sizeable  reduction  in  late  payments.  While 
precise estimates are difficult to quantify, based on the above-mentioned evidence 
we expect a reduction in payment times of up to 40% in G2B transactions under 
both PO2a and PO2b (mainly from the deterrent of interest and compensation), and 
up to 17.8% of reduction in B2B transactions under PO2a (mainly from stronger 
enforcement bodies). 

6.1.2.1.2  Costs 

192.  The main cost on businesses under PO2 will fall on those debtors that currently pay 
late.  The  compensation  amounts  debtors  are  liable  for  if  there  is  no  change  to 
that  automatic  payment  of 
current  behaviour  are  enormous.  Assuming 
compensation  would  benefit  an  extra  5%  of  companies,  debtors  would  pay 
EUR 265.5 million in interest and EUR 3.75 billion in fees. However, debtors can 
avoid  this  cost  by  paying  on  time.  Debtors  would  need  to  obtain  the  financing 
needed but this financing would likely be cheaper than the implicit rate they are 
paying now (see section 2.3 and 8.1.2 for detailed explanation). 

193.  Under both PO2a and PO2b, some standard one-off adjustment cost will fall on all 
businesses; if the compensation fee is adapted, businesses will have to adapt their 
standard payment terms to the new sum. Using the same method  as in PO1 and 
assuming a EUR 10 one-off adjustment cost per company, this one-off adjustment 
cost would impose a total cost of EUR 243 million for the EU-27. 

194.  Under  PO2a,  debtors  are  liable  to  administrative  fines  that  enforcement  bodies 
would impose. Extrapolating to the EU-27 from the example of the French B2B 
payment  delays  mission  would  suggest  potential  fines  to  firms  paying  late  of 
around EUR 136.8 million per year. Debtors could avoid these fines by paying on 
time. 

195.  Contractors under public contracts will have to show that they have paid their own 
subcontractors on time. This could affect a relatively large number of companies. 
There are around 3.7 million companies active in the construction sector115. While 
there are no exact figures on how many of these companies work for the public 
sector  as  a  main  contractor,  if  we  assume  all  companies  working  on  civil 
engineering  projects  are  under  public  contract,  we  can  estimate  about  18%  of 
construction companies to be in a public contract, i.e. 666 000 companies116. Of 
these, 26% are main contractors117. This measure might therefore impose a cost on 
around 173 000 companies. Assuming that each of these companies has to provide 
this information once a year, and the time to collect this information is equal to 0.5 
man-hours at EUR 25.7 average hourly rate, the overall recurring  administrative 
cost amounts to EUR 2.2 million. The verification cost to contractors would consist 
in providing a self-declaration and an excerpt from accounting systems showing 

115 JRC estimates for 2022 based on Eurostat Structural Business Statistics. 
116 European Construction Industry Federation, Statistical Report, https://fiec-statistical-report.eu/  
117 European Construction Industry Federation, case study 

52 

 
 
 
that all invoices related to the project had been paid. The measure would only apply 
to payments to immediate suppliers (Tier 2) of main contractors (Tier 1). 

6.1.2.2  Impacts on SMEs and competitiveness 

196.  This  policy  option  and  all  its  sub-options  will  have  impacts  on  SMEs  and  the 
economy’s competitiveness. All measures target all companies, and no exclusion 
of scope for any measures is proposed. 

197.  As  in  PO1,  impacts  are  likely  to  be  more  positive  for  SMEs  than  for  large 
enterprises.  SMEs  are  particularly  affected  by  non-payment  of  interest  or 
compensation  fees  and  are  less  likely  to  be  able  to  enforce  claims  without  the 
support of a public enforcement body. 

198.  Competitiveness  is  overall  expected  to  be  enhanced.  As  in  PO1,  reducing  late 
payments will lead to an increase in aggregate cash flow, improved certainty about 
cash  flow  and  reduced  cost  of  chasing  debtors  (including  the  costs  of  judicial 
procedures). 

199.  On international competitiveness, there is some risk that companies outside the EU 
can  accept  late  payments  without  automatic  interest  or  compensation  fees. 
However, this effect is not necessarily likely to lead to an actual undercutting of 
EU  companies.  Instead,  the  most  likely  effect  is  that  also  those  EU  companies 
competing internationally will refuse to claim the interest rates and compensation 
fees. This effect is already priced in for the above calculations, where the monetary 
value of interest and compensation fees only assumes a 5% increase in companies 
receiving  interest  and  compensation,  and  where  the  effect  on  B2B  relations  is 
estimated to be smaller than for G2B. Furthermore, mismatches in the length of 
payment terms in international transactions are usually addressed by trade finance 
solutions  e.g.  cash-in-advance,  letter  of  credit,  documentary  collections,  open 
account and consignment118 (see Annex 5), which significantly reduces the impact. 

200.  There  may  be  some  costs  arising  from  PO2  to  SMEs.  SMEs,  like  any  other 
business, will have to pay interest and compensation fees if they pay late. If SMEs 
find it difficult to enforce interest from debtors but must pay interest to creditors, 
where they pay late because they have been paid late, the automatic interest and 
compensation may affect SMEs more than large businesses. 

201.  This assessment is confirmed by the responses to the SME Panels. SMEs strongly 
support the measures identified above, more than the PC respondents, where a clear 
comparison is possible. For example, on setting up enforcement bodies, SMEs find 
this  measure  very  useful  (84%),  whereas  47%  of  PC  respondents  support 
enforcement bodies with sanctioning power. 

118 https://www.trade.gov/methods-payment 

53 

 
 
 
6.1.2.3  Impacts on public authorities 

6.1.2.3.1  Benefits 

202.  This policy option provides for no direct savings to public authorities. 

203.  The  measure  of  ensuring  prompt  payments  to  subcontractors  in  public  works 
contracts can improve the execution of public construction projects. The example 
of  Canada,  where  a  similar  policy  is  in  place,  has  shown  that  payment  delays 
impede the ability of the federal government to complete its construction projects 
quickly  and  at  the  best  value  for  the  Canadian  taxpayer119.  Reducing  payment 
delays in public work contracts therefore benefits the public authority. 

6.1.2.3.2  Costs 

204.  Public authorities will incur several costs under PO2. A significant cost is expected 
to come from the requirement to designate enforcement bodies. Based on examples 
and estimations from Member States who responded to the Call for Evidence, an 
extrapolation to the EU-27 suggests a yearly adjustment cost of EUR 60-65 million 
when including  all Member States (see Annex 4). Some Member States  already 
have such enforcement bodies in place, e.g. France. While they would still bear the 
same yearly cost, this would not impose additional cost compared to the baseline. 
As only a few Member States have such enforcement bodies in place already, for 
the analysis of costs we therefore stick to the maximum cost of EUR 60-65 million, 
so as to use a conservative estimate and rather overestimate than underestimate the 
true costs. 

205.  Existing  enforcement  bodies  can  also  take  on  those  tasks.  For  example,  bodies 
tasked  with  enforcing  the  UTP  directive  already  deal  with  some  aspects  of  late 
payments. Member States  would therefore not  need to  set  up new bodies, but  it 
would be sufficient to  make  an existing  body  responsible for  carrying out these 
tasks. 

206.  Public authorities that pay late will incur interest and compensation fees. They will 
either  have  to  pay  the  compensation  provided  for  or  adjust  their  own  payment 
behaviour. 

207.  PO2  also  implies  costs  on  public  authorities  in  their  own  public  tenders.  Public 
authorities may check the payment behaviour of their contractors when verifying 
invoices.  This  would  impose  some  verification  time  and  cost  e.g.  contacting 
subcontractors. 

119 https://www.tpsgc-pwgsc.gc.ca/biens-property/divulgation-disclosure/psdic-ppci-eng.html 

54 

 
 
 
6.1.3  Policy  Option  3:  Empowering  SMEs  and  ensuring  more  fairness  in  business 

transactions 

6.1.3.1  Impacts on enterprises 

6.1.3.1.1  Benefits 

208.  PO3 focuses mainly on ensuring that enterprises whose invoices are overdue have 

an effective and affordable means of redress to ensure these invoices are paid. 

209.  The main benefits to businesses from PO3 come from reduced enforcement costs 
to  chase  late  payments.  These  are  currently  significant;  according  to  some 
estimates,  between  5  and  10%  of  administrative  work  for  an  SME  consists  of 
chasing late payments120. It is difficult to quantify how much of this is down to 
litigation costs in the courts. 

210.  Currently, many businesses do not take their cases to court, for fear of jeopardising 
a business relationship or because they cannot afford the upfront costs. In this case, 
alternative  dispute  resolution  mechanisms  may  not  produce  any  direct  savings; 
however, they make it more likely for companies to seek redress in the first place. 

211.  Both PO3a and PO3b target the same objectives. Their effectiveness in reaching 

these benefits differs somewhat: 

1)  PO3a (national payment envoy): The envoy, (see 0), would not directly intervene in 
administrative disputes, unless Member States specifically empower them to do so. As 
the envoy’s role would focus on providing advice and information, the direct benefits 
to businesses would not necessarily be monetary. Nonetheless, monetary benefits may 
materialise  if  the  information  provided  leads  to  a  recovery  of  unpaid  debt. 
Extrapolating  from  the  example  of  the  UK’s  Small  Business  Commissioner121  (see 
Annex 4 for full calculations and limitations linked to extrapolation), the intervention 
of a payment envoy could lead to around EUR 2.6 million in recovered debt across the 
EU-27. 

2)  PO3b (national mediation system): A national mediation system would more directly 
lead to monetary benefits for those businesses that currently rely on court litigation, 
and on access to dispute resolution for those businesses that currently avoid going to 
courts to recover unpaid debt. Extrapolating from the number of cases by the French 
médiateur des entreprises122, such a system may provide mediation services for more 
than  70 000  companies  across  the  EU-27.  The  French  mediation  service  reaches  an 
amicable  conclusion  in  70%  of  cases.  While  court  fees  vary  significantly  among 

120 Plum Consulting 2017 
121  Office  of 
the  Small  Business  Commissioner,  Annual  Report  and  Accounts  2021-2022, 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1130182/
Office_of_the_Small_Business_Commissioner_Annual_Report_and_Accounts_2021-22.pdf  
122 https://www.economie.gouv.fr/mediateur-entreprises-bilan-activite-2021  

55 

 
 
 
Member  States,  assuming  a  median  court  fee  of  EUR  550123  this  relatively  modest 
number of enterprises supported may already lead to total enforcement cost savings of 
nearly EUR 27 million (taking into account the 70% success rate). 

212.  Both measures are equally supported. In the PC, 65% of stakeholders are positive 
towards  a  national  mediation  system,  while  65%  of  SMEs  in  panels  found  the 
national payment envoy useful or very useful. 

213.  Apart from these measures focusing on avoiding court cases, PO3 foresees stronger 
legal  protections  for  the  creditor  if  a  case  ends  up  in  court.  Currently,  unfair 
payment practices  are poorly defined and it is  up to  the  creditor to prove that  a 
clause or contract was unfair.  

214.  The  proposals  to  request  Member  States  to  specifically  address  the  question  of 
unfair contractual terms and practices through their applicable national law would 
provide direct benefit for the creditor. The creditor would save on the time needed 
to prove that a clause or practice is unfair. This time and cost saving for the creditor 
translates directly into a cost for the debtor who has to prove the clause or practice 
is not unfair. The idea would be to make it easier for a creditor to argue a case in 
court  pursuant  to  the  measures  introduced  by  Member  States.  It  is  difficult  to 
quantify this effect, as it relies mostly on transparency and the final measures to be 
adopted by Member States. A business will gain a better understanding of whether 
it is worth going to court if it can check on a list whether the payment practice they 
encountered is defined as unfair. This may also reduce the number of court cases; 
if a payment practice is openly listed as unfair according to national law, the debtor 
has a stronger incentive to avoid going to court in the first place. 

215.  PO3 will provide the smallest direct reduction of payment delays out of the three 
policy options proposed, as it targets only those payments that are already late and 
focuses on helping the creditors recover their debts. The SME panel has shown that 
24% of SMEs rarely use mediation services, and 13% use them often. The measures 
presented  above  could,  in  a  realistic  scenario,  aim  to  increase  the  share  of 
companies ‘often’ using mediation to the share of those currently using it ‘rarely’, 
i.e. an increase of 11 percentage points. Assuming that the average payment delay 
when a company uses mediation services is reduced by 50%, PO3 might lead to a 
total reduction of payment delays by 5.5%. 

6.1.3.1.2  Costs 

216.  The costs to businesses under this option are relatively limited. All parties benefit 
from mediation services and clear national rules on unfair practices; even debtors 
will  have  reduced  costs  if  cases  go  to  a  mediation  system  rather  than  to  court. 
Indirect effects could include a reduction in income for commercial providers of 
financial training or mediation. 

123 Based on the 2021 EU Justice Scoreboard, https://op.europa.eu/en/publication-detail/-
/publication/b2a115fd-3d1d-11ec-89db-01aa75ed71a1  

56 

 
 
 
6.1.3.2  Impact on SMEs and competitiveness 

217.  The measures under PO3 are targeted at SMEs. SMEs usually avoid going to court, 
for lack of financial means or fear of jeopardising business relationships, and SMEs 
are therefore most likely to benefit from mediation services or a national payment 
envoy. 

218.  Currently, relatively few SMEs use mediation or arbitration services (in the SME 
Panel, only 7.4% of SMEs stated they used mediation the last time they were paid 
late, and only 3% used arbitration). This is largely due to the fact that mediation 
services  are  not  widespread.  A  national  system  of  mediation  would  likely  bring 
them closer to SMEs. 

219.  Competitiveness is overall expected to be enhanced. As in option PO1, reducing 
late payments will lead to an increase in aggregate cash flow, which will have a 
positive effect on price/cost competitiveness as well as innovation competitiveness. 
Both  PO3a  and  PO3b  are  unlikely  to  have  any  effect  on  international 
competitiveness  because  they  focus  on  providing  alternative  means  of  redress 
which companies are free to use or not. 

6.1.3.3  Impacts on public authorities 

6.1.3.3.1  Benefits 

220.  Public  authorities  are  also  likely  to  benefit  if  their  own  delayed  payments  are 
resolved through a mediation service rather than through court action. The effect 
of this is estimated to be fairly limited. The UK’s Small Business Commissioner 
covers only B2B disputes and not disputes with public authorities. 

221. 

In addition, public authorities will see a smaller burden on their judicial system if 
more cases end up solved in mediation services or avoid court cases. 

6.1.3.3.2  Costs 

222.  The costs on public authorities stem mainly from having to set up and run the office 
of the national payment envoy or the national mediation service. Based on similar 
existing bodies, the cost of the sub-options on Member States can be quantified as 
follows: 

1)  PO3a  (national  payment  envoy):  Extrapolating  from  the  case  of  the  UK’s  Small 
Business Commissioner, such an office will pose a recurring cost on Member States of 
EUR 11.8 million per year. 

2)  PO3b (national mediation system): the Commission launched in 2023 a pilot project to 
in  Belgium. 
design  and 
in 
Extrapolating from this pilot to all sectors and all EU Member States, we can estimate 
a recurring adjustment cost on Member States per year of between EUR 10.8 million 
and EUR 39.8 million. The difference mainly stems from whether companies’ access 

the  construction  sector124 

implement  mediation 

124 Services - 127264-2023 - TED Tenders Electronic Daily (europa.eu) 

57 

 
 
 
to mediation is fully covered by the state (in compliance with state aid rules) or some 
cost would remain to be borne by the companies using the mediation service. 

223.  For  both  PO3a  and  PO3b,  a  few  Member  States  already  have  such  bodies  or 
systems in place. However, as this is only the case for a few Member States, for the 
analysis of costs we stick to the maximum cost, so as to use a conservative estimate 
and rather overestimate than underestimate the true costs. 

224. 

In addition, there are some one-off costs on public authorities in Member States to 
specifically address the question of unfair contractual terms and practices through 
their applicable national law. These one-off costs are estimated to be limited and 
can be covered by public authority staff under a ‘business as usual’ scenario. 

6.2  Social impacts 

225.  All policy options will have a social impact, particularly on employment, fairness 

in business culture and wellbeing of entrepreneurs. 

226.  A reduction in late payment as estimated under all policy options above could lead 
to an increase in employment. The evidence for each day of reduced late payments 
is difficult to directly quantify. However, assuming the figure of 6 million jobs if 
all payments were made on time (see section 2), the estimated reduction of 23.4% 
under PO1a could lead to an increase in employment of nearly 1.5 million jobs, 
with  the  other  policy  options  leading  to  correspondingly  smaller  increases. 
However, as it is up to the company to decide how to make use of the increased 
cash flow, and as some jobs may be safeguarded from reduced risks of bankruptcy, 
it is not feasible to provide a precise number. 

227.  Some social impacts are not possible to quantify. One of the main responses by 
entrepreneurs when asked about the impact of late payments is the effect it has on 
their wellbeing. For example, 92% of respondents in the SME panel responded that 
late  payments  affect  their  well-being,  generate  stress  and  anxiety.  Similarly,  the 
report of the UK’s Small Business Commissioner raises the frequency with which 
mental health impacts were raised by businesses requesting their services. 

228.  Late payments also have a direct, albeit non quantifiable effect on entrepreneurship. 
In as much as no specific data is collected for the impact of late payments, the fear 
of bankruptcy is one of the main barriers reported to start an entrepreneurial career 
and may be used as a proxy. For example, both in France and Germany over 40% 
of persons that see good opportunities would not start a business for fear it might 
fail125. 80% of respondents to the SME panel confirmed that late payment heavily 
affects the survival of their business. 

125 
https://www.gemconsortium.org/reports/latest-global-report 

Entrepreneurship  Monitor 

Global 

2022/2023 

Global 

Report, 

Table 

A3 

- 

58 

 
 
 
 
6.3  Fundamental rights 

229.  None of the policy options proposed will infringe on EU fundamental rights. 

230.  PO1 will limit the freedom to conduct business by affecting contractual freedom 

between businesses to set their own payment terms. 

6.4  Environmental impacts 

231.  None of the policy options will have a direct environmental impact. There might 
be some indirect  effects, if prompt  payments  and the resulting  higher  cash flow 
allow  companies  to  make  investments  in  the  green  transition  they  would  not 
otherwise have made. This effect is unquantifiable, however, as it depends on the 
company choice where to invest, which is not in the scope of the present initiative. 
To give some indication, in the SME panels, when asked whether late payments 
prevented  their  business  from  becoming  more  green,  28%  of  SMEs  agreed,  but 
30%  disagreed.  Digital  communication  tools  and  certificates  can  help  make 
deliveries  of  documents  electronic  and  reduce  the  carbon  footprint  of  mail 
deliveries. 

232.  None of the policy options will cause any significant harm to the environment. 

7  HOW DO THE OPTIONS COMPARE? 

233.  This  section  compares  the  policy  options  against  the  impacts  on  the  key 
stakeholders  (enterprises  and  public  authorities)  as  well  as  against  relevant 
objectives  in  terms  of  their  effectiveness,  efficiency  and  proportionality.  The 
baseline is represented as 0, with options compared to the baseline represented by 
‘+/++/+++’ or ‘-/--/---’ to show net positive or negative impacts compared to the 
baseline option, respectively. The net impacts are assessed through a comparison 
between benefits and costs; ‘+/++/+++’ therefore mean a net positive impact (i.e. 
higher benefits than costs), whereas ‘-/--/---’ mean net negative impact (i.e. higher 
costs than benefits). 

7.1  Comparison  of  options  based  on  costs  and  benefits  to  enterprises  and  public 

authorities 

Table 4: Summary of costs and benefits including net benefit/cost estimates 

Main benefits 

Main costs 

PO 1a 

cap, 

(30-day 
payment 
30-day 
verification  cap, 
credit  /  digital 
training) 

Reduction in payment delays of 
23.4%  for  the  average  EU 
company,  reduction  in  hassle 
costs  of  EUR  5.8  billion, 
improved cash flow 

One-off  adjustment  cost  of  EUR 
56.1 million 

Negligible 
public 
costs 
authorities  as  capped  payment 
terms concern B2B transactions 

to 

Reduced  negotiation  times  for 
around  33%  of  SMEs  and 
literacy 
to  financial 
access 

Some  adjustment  cost  for  public 
authorities  to  provide  access  to 

Net  benefits/costs  (see 
comparative 
also 
summary in table 5) 

Businesses:  one-off  costs 
significantly outweighed by 
recurrent 
in 
reduced payment delays and 
hassle costs 

benefits 

Public  authorities:  limited 
costs  balanced  by  indirect 
benefits 

59 

 
 
 
training  worth  EUR  200-1800 
per SME 

financial 
management training 

literacy 

and 

credit 

PO 1b 

cap, 

(60-day 
payment 
30-day 
verification  cap, 
credit  /  digital 
training) 

PO 1c 

(60-day 
payment  cap  in 
transaction  with 
SME  creditors, 
30-day 
verification  cap, 
credit  /  digital 
training) 

PO 2a 

(aut. payment of 
interest  and  flat 
fee 
compensation, 
flat 
fee 
compensation  at 
EUR 50, 
designating 
strong 
enf. 
bodies,  PP  self-
of 
declaration 
to 
payment 
subcontractors) 

Public authorities benefit from 
indirect effects of reduced late 
payments  on  bankruptcies  and 
employment 

Reduction  in  payment  delays 
for  14.4%  of  EU  companies, 
improved cash flow 

Reduced  negotiation  times  for 
around 5% of SMEs and access 
to  financial  literacy  training 
worth EUR 200-1800 per SME 

Public authorities benefit from 
indirect effects of reduced late 
payments  on  bankruptcies  and 
employment 

Reduction  in  payment  delays 
for  66%  of  invoices  issued  by 
14.4% of companies, improved 
cash flow 

Reduced  negotiation  times  for 
around 5% of SMEs and access 
to  financial  literacy  training 
worth EUR 200-1800 per SME 

Public authorities benefit from 
indirect effects of reduced late 
payments  on  bankruptcies  and 
employment 

Strong 
enforcement 
accompanied  by  sanctions  and 
reduce 
fines,  estimated 
payment delays by 17.8% 

to 

Automatic payment of interests 
(EUR  265.5  million)  and 
compensation  fees  (EUR 3.75 
billion) 

(EUR 

Unblocking  of  payments  to 
31 
subcontractors 
million  per  year)  in  public 
works contracts, and improved 
execution  of  public  work 
projects 

hassle 

Reduced 
costs 
associated  with  chasing  late 
payments, improved cash flow 

Income  to  public  purse  from 
regulatory  fines  imposed  on 

One-off  adjustment  cost  of  EUR 
35.0 million 

public 
costs 
Negligible 
authorities  as  capped  payment 
terms concern B2B transactions 

to 

Some  adjustment  cost  for  public 
authorities  to  provide  access  to 
financial 
credit 
management training 

literacy 

and 

One-off  adjustment  cost  of  EUR 
23.1 million; cost of verifying SME 
status of EUR 384 million 

Negligible 
public 
costs 
authorities  as  capped  payment 
terms concern B2B transactions 

to 

Some  adjustment  cost  for  public 
authorities  to  provide  access  to 
financial 
credit 
management training 

literacy 

and 

fines 

Regulatory 
imposed  on 
debtors of up to EUR 136.8 million 
per year for the EU-27 

One-off  adjustment  cost 
from 
updating  standard  payment  terms 
of EUR 243 million 

Cost  to  the  debtor  of  automatic 
interest  and  compensation  fees 
(equivalent 
the 
creditor) 

to  benefit 

to 

Cost to main contractors in public 
contracts 
their 
prompt  payment 
the  public 
authority  (EUR  2.2  million  per 
year) 

from  verifying 
to 

Businesses:  one-off  costs 
outweighed  by 
recurrent 
benefits in reduced payment 
delays and hassle costs, but 
only  affects  a  subset  of 
companies 

Public  authorities:  limited 
costs  balanced  by  indirect 
benefits 

Businesses:  for  a  subset  of 
companies, 
recurrent 
benefits in reduced payment 
delays and hassle costs, but 
significant  costs  due 
to 
requirement  to  prove  SME 
status 

Public  authorities:  limited 
costs  balanced  by  indirect 
benefits 

benefits 

significant 
to 
from  automatic 

Businesses: 
recurrent 
creditors 
interest/compensation 
flanked 
strong 
with 
enforcement,  outweighing 
one-off adjustment costs 

Public  authorities:  cost  to 
run enforcement bodies and 
to 
pay 
interest/compensation,  but 
weighed  up  by  improved 
execution  of  public  works 
potential 
and 
contracts 
revenue 
regulatory 
from 
fines 

Cost  on  public  authorities  from 
having 
and 
compensation 
to  public 
contractors when paying late 

to  pay 

interest 

fees 

Cost  of  designating  national 
enforcement  bodies,  estimated  at 

60 

 
 
debtors (EUR 136.8 million per 
year for the EU-27) 

EUR 60-65 million per year for the 
whole EU-27 

PO 2b 

flat 

(aut. payment of 
interest  and  flat 
fee 
compensation, 
staggered 
fee 
compensation, 
designating 
monitoring 
bodies,  PP  self-
of 
declaration 
payment 
to 
subcontractors) 

Automatic payment of interests 
(EUR  265.5  million)  and 
compensation fees (EUR 3.0 – 
7.5 billion) 

Deterrent 
bodies 

from  enforcement 

(EUR 

Unblocking  of  payments  to 
subcontractors 
31 
million  per  year)  in  public 
works contracts, and improved 
execution  of  public  work 
projects 

hassle 

Reduced 
costs 
associated  with  chasing  late 
payments, improved cash flow 

One-off  adjustment  cost 
from 
updating  standard  payment  terms 
of EUR 243 million 

Cost  to  the  debtor  of  automatic 
interest  and  compensation  fees 
(equivalent 
the 
creditor) 

to  benefit 

to 

Cost to main contractors in public 
contracts 
their 
prompt  payment 
the  public 
authority  (EUR  2.2  million  per 
year) 

from  verifying 
to 

Cost  on  public  authorities  from 
having 
and 
compensation 
to  public 
contractors when paying late 

to  pay 

interest 

fees 

PO 3a 

(national 
payment  envoy, 
MS  to  address 
unfair terms and 
practices) 

PO 3b 

(national system 
of  mediation, 
MS  to  address 
unfair terms and 
practices) 

Cost  of  designating  national 
enforcement 
without 
sanctioning powers 

bodies 

EUR  2.6  million  per  year  in 
recovered debt across EU-27 

Reduced  burden  on  judicial 
system  through  avoided  court 
cases 

No additional cost to businesses 

Cost 
to  public  authorities  of 
running  national  payment  envoys, 
estimated at EUR 11.8 million per 
year for the whole EU-27 

No additional cost to businesses 

to  public  authorities  of 
Cost 
running 
system, 
mediation 
estimated at EUR 10.8-39.8 million 
per year for the whole EU-27 

Cost savings of EUR 27 million 
per  year  from  avoided  court 
cases 

Reduction in payment delays of 
5.5% 

Reduced  burden  on  judicial 
system  through  avoided  court 
cases 

Public  authorities  can  cheaper 
their  own  disputes 
solve 
services 
through  mediation 
instead of being taken to court 

benefits 

significant 
to 
from  automatic 

Businesses: 
recurrent 
creditors 
interest/compensation, 
outweighing 
adjustment 
costs, 
limited enforcement 

one-off 
but 

Public  authorities:  cost  to 
run enforcement bodies and 
to 
pay 
interest/compensation,  only 
partly  weighed  up  by 
of 
execution 
improved 
public works contracts 

Businesses:  positive  effect 
from payment envoys at no 
additional cost 

Public  authorities:  cost  to 
run  payment  envoys,  only 
partly  weighed  up  by 
reduced  burden  on  judicial 
system 

significant 
Businesses: 
positive 
from 
mediation  systems  at  no 
additional cost 

effect 

Public  authorities:  cost  to 
run  mediation 
systems, 
weighed  up  by  reduced 
burden  on  judicial  system 
and  solving  G2B  disputes 
through mediation 

61 

 
 
 
 
 
Table 5: Comparison of options based on net impacts (benefits minus costs) for enterprises and public 
authorities 

Net impacts on 
businesses 

Net impacts on 
public 
authorities 

PO 1a 
(30-day payment cap, 30-day verification cap, credit / digital training) 

PO 1b 
(60-day payment cap, 30-day verification cap, credit / digital training) 

PO 1c 

(60-day  payment  cap  in  transaction  with  SME  creditors,  30-day 
verification cap, credit / digital training) 

PO 2a 

(aut.  payment  of  interest  and  flat  fee  compensation,  flat  fee 
compensation  at  EUR 50,  designating  strong  enf.  bodies,  PP  self-
declaration of payment to subcontractors) 

PO 2b 

(aut. payment of interest and flat fee compensation, staggered flat fee 
compensation,  designating  monitoring  bodies,  PP  self-declaration  of 
payment to subcontractors) 

PO 3a 
(national payment envoy, MS to address unfair terms and practices) 

PO 3b 
(national system of mediation, MS to address unfair terms and practices) 

7.1.1  Policy Option 1 

++ 

+ 

- 

++ 

+ 

+ 

++ 

0 

0 

0 

0 

- 

- 

0 

234.  Looking  at  PO1,  it  becomes  clear  that  PO1a  will  bring  the  largest  benefits  on 
businesses. PO1a with its cap of 30 days will affect most EU companies because 
currently  average  payment  terms  are  above  30  days.  PO1b  will  affect  fewer 
companies  than  PO1a  (PO1b  affects  only  those  companies  specifying  payment 
terms above 60 days), and PO1c in turn affects fewer companies than PO1b (only 
those  invoices  where  the  creditor  is  an  SME).  Benefits  to  businesses  are 
correspondingly  lower  in  PO1b  and  lowest  in  PO1c,  but  each  option  will  bring 
benefits for a smaller subset of companies compared to the baseline. 

235. 

Initial adjustment costs to businesses are highest in PO1a, where most companies 
are affected. Although  direct  adjustment costs are slightly higher for PO1b than 
PO1c (see section 6), this relatively small difference is overshadowed by the cost 
resulting from the need for the creditor to verify that they are an SME. PO1c is 
therefore shown as the only one of the three options with a net negative impact. 

236.  For public authorities, there are no substantial differences among PO1a, PO1b and 
PO1c. Benefits to public authorities under each option are expected to be limited, 

62 

 
 
 
and  the  costs  imposed  relatively  small,  focusing  mainly  on  publishing  their 
payment information. 

7.1.2  Policy Option 2 

237. 

In PO2, the main benefits to businesses come from increased collection of interest 
and  fees,  as  well  as  improved  enforcement.  Therefore,  PO2a  is  judged  to  bring 
more  benefits  than  PO2b.  Although  the  precise  amounts  of  interest  rates  and 
compensation  fees  differ  relatively 
the 
accompanying measure of stronger enforcement including administrative fines in 
PO2a makes it more likely for companies to actually collect the compensation they 
are owed. 

little  between 

two  options, 

the 

238.  Under PO2 direct monetary benefits translate directly into direct costs to the debtor 
that has to  pay the compensation.  If  less compensation is  collected, the  reduced 
benefits translate into reduced cost for the debtor. Nonetheless, benefits are higher 
than costs in both PO2a and PO2b, as the costs on the debtor are entirely avoidable 
by  paying  on  time,  while  the  benefits  to  the  creditor  materialise  regardless  of 
whether the debtor pays interest or pays on time. 

239.  Costs to public authorities are higher under PO2a as the enforcement bodies need 
more resources  to  impose administrative fines. PO2b will only impose a cost  to 
designate the enforcement body. 

7.1.3  Policy Option 3 

240.  Under PO3b, businesses will benefit more from a fully-fledged mediation system 
than a national payment envoy (PO3a). The costs to businesses are negligible in 
either scenario and can lead to cost savings for both creditors and debtors, who will 
avoid court costs. 

241.  For  public  authorities,  the  cost  of  PO3b  is  potentially  higher  than  PO3a  as  the 
mediation  system  requires  more  resources.  However,  the  benefits  to  public 
authorities are also higher under PO3b as a mediation system may also avoid court 
disputes where the public authority itself has paid late and aims to find an amicable 
resolution with its creditor. PO3b is therefore estimated to have a neutral effect on 
public authorities, whereas PO3a imposes a small budgetary negative impact. 

7.2  Comparison based on effectiveness, efficiency, proportionality, coherence and 

subsidiarity 

242.  The table below reflects a Commission services’ assessment based on the in-house 

expertise and the sources used to prepare this impact assessment report. 

Table 6: Comparison based on effectiveness, efficiency, proportionality, coherence and subsidiarity 

Effectiveness  Efficiency 

Proportionality  Coherence 

Subsidiarity 

PO1a 

PO1b 

+++ 

++ 

++ 

+ 

+ 

+ 

+ 

+ 

- 

- 

63 

 
 
 
PO1c 

PO2a 

PO2b 

PO3a 

PO3b 

+ 

+++ 

++ 

+ 

++ 

7.2.1  Effectiveness 

- 

+ 

+ 

0 

+ 

- 

+ 

+ 

++ 

++ 

+ 

++ 

++ 

++ 

++ 

- 

+ 

+ 

++ 

++ 

243.  The most effective policy options in terms of meeting policy objectives are PO1a 
and  PO2a.  They  provide  the  most  direct  benefits  to  businesses  and  have  the 
potential to reduce payment delays the most. They are most effective in preventing 
late payments from occurring and making timely payments actually happen. PO1a, 
through reducing the average payment term for  most EU companies, is likely to 
lead  to  a  significant  reduction  in  payment  times.  PO2a  has  the  potential  for  a 
significant  reduction  in  G2B  payment  delays  and  provides  compensation  to 
creditors when payment terms are not respected, flanked by national enforcement 
systems. 

244.  However,  both  policy  options,  when  implemented  as  self-standing  options,  will 
pose  some  risks.  PO1a,  when  implemented  without  strong  enforcement  bodies, 
poses  the  risk  of  companies  not  respecting  the  agreed-upon  maximum  payment 
terms and paying late. PO2a poses the converse risk: when implemented without 
capped  payment  terms,  it  provides  businesses  with  an  incentive  to  negotiate 
unfairly  long  payment  terms  to  avoid  having  to  pay  interest,  compensation  or 
administrative fines. 

245.  PO3b is the most effective choice under PO3. By offering a nationwide mediation 
system and requesting Member States to specifically address the question of unfair 
contractual  terms  and  practices  through  their  applicable  national  law,  it  allows 
companies to avoid going to court when chasing late payments and offers a clearer 
incentive to avoid a court case. However, as this option only targets those payments 
that  are  already  delayed  and  supports  companies  in  effectively  chasing  their 
debtors,  the  overall  effectiveness  in  reducing  payment  delays  is  estimated  to  be 
significantly smaller than for PO1a and PO2a. 

246.  With  regard  to  meeting  the  specific  policy  objectives,  each  stand-alone  policy 
option mostly addresses one of the specific objectives. PO1 (and its sub-options) is 
mostly  focused  on  addressing  the  specific  objective  of  preventing  late  payment 
from occurring, PO2 (and its sub-options) on facilitating timely payment, and PO3 
(and  its  sub-options)  on  empowering  SMEs  and  ensuring  more  fairness  in 
commercial transactions. 

7.2.2  Efficiency 

247.  Almost all options achieve their goals relatively efficiently. The negative standouts 
in terms of efficiency are PO1c and PO3a. PO1c targets a relatively small subset 
of companies, only those that specify payment terms above 60 days and where the 

64 

 
 
creditor  is  an  SME  but  imposes  disproportionately  high  cost  (administrative 
burden) for the creditor having to prove that they are an SME. PO3a imposes very 
few  costs  on  businesses,  but  the  recurring  costs  on  Member  States  to  set  up  a 
national payment envoy are difficult to justify with the limited benefits this will 
bring to reduce late payments overall. 

248.  All other options are efficient, as they contribute to the objectives at appropriate 
cost. PO1a is judged to be more cost-effective than PO1b. While PO1a imposes a 
higher  one-off  cost,  it  will  also  bring  recurring  benefits  to  a  larger  group  of 
enterprises  and  thus  provide  a  stronger  contribution  to  the  objectives,  whereas 
PO1b imposes  a smaller one-off  cost  but  will only  bring benefits  to  a subset  of 
companies.  Juxtaposing  the  one-off  cost  with  recurring  benefits  shows  PO1a  as 
more efficient. 

249.  PO2a  and  PO2b  are  judged  to  be  similarly  efficient,  with  PO2a  posing  higher 
recurring  costs  on  public  authorities  in  designating  enforcement  bodies  with 
sanctioning powers; while PO2b poses lighter recurring costs on Member States 
through  less  powerful  enforcement  bodies,  but  at  the  trade-off  of  a  reduced 
deterrent to businesses paying late. 

250.  PO3b  achieves  its  smaller  effectiveness  with  a  limited  cost  on  businesses  and 

public authorities. 

7.2.3  Proportionality 

251.  The  initiative  will  contribute  to  achieving  Commission’s  priority  to  deliver 
‘economy that works for the people’. It follows from the President’s 2022 SOTEU 
speech and will aim to strengthen the competitiveness of EU companies and a better 
functioning  of  the  single  market.  It  aims  at  increasing  fairness  in  commercial 
relations along the supply chains. It will support the commitment to implementing 
four SDGs.  

252.  All options respect the principle of proportionality. They impose only the cost on 
businesses that is necessary to achieve the objectives and leave room for discretion 
to Member States in how enforcement bodies are designated. The only exception 
to  this  is  PO1c,  where  the  verification  that  the  creditor  is  an  SME  poses 
disproportionate cost for no clear benefit compared to PO1b. PO3a and PO3b leave 
more room for interpretation to Member States in terms of how payment envoys or 
mediation systems are structured. 

7.2.4  Coherence 

253.  All  policy  options  are  coherent  with  other  EU  legislation,  and  the  differences 
between  them  in  terms  of  coherence  are  not  substantial.  Where  potential  issues 
arise, the different sub-options (e.g. capping at 30 or 60 days) show no significant 
difference as to overall coherence. 

254.  PO1 and PO2  (and  all its  sub-options)  could  pose some  risks of inconsistencies 
with  the  UTP  directive,  where  the  general  rule  of  maximum  payment  terms  is 

65 

 
 
established in the LPD whereas the exceptional rule of the UTP directive will be 
applicable in the agri-food sector as an exception. To avoid such risks, as explained 
in paragraph 130 above, there are two options: a revision of the UTP Directive or , 
alternatively,  and  without  prejudice  to  all  relevant  legal  considerations,  the 
proposal  of  the    new  legal  instrument    replacing  the  LPD  might  clarify  the 
relationship UTP-LPD and align as closely as possible with the UTP directive (see 
section 5 for more details). 

255.  PO2’s  measure  on  main  contractors  having  to  pay  their  subcontractors  on  time 
implies some interplay with the Public Procurement Directives. The measures have 
been  specifically  drafted  so  as  to  be  fully  in  line  with  the  Public  Procurement 
Directives. 

256.  PO3 is fully coherent with other EU legislation and recommendations in the field 

of mediation. 

7.2.5  Subsidiarity 

257.  The principle of subsidiarity is fully respected across all policy options. All options 
impose only the cost on Member States and businesses that is necessary to achieve 
the objectives and leave room for discretion to Member States wherever possible, 
e.g. in how enforcement bodies are designated. 

258.  PO1 is ranked lower on subsidiarity as it leaves no discretion to Member States in 
terms of maximum payment terms to avoid different rules across the EU. However, 
PO1  leaves  it  up  to  Member  States  how  precisely  to  facilitate  SMEs’  access  to 
financial literacy and credit management trainings. 

259.  PO2  sets  overall  levels  of  compensation  and  interest  to  ensure  similar  levels  of 
compensation  across  the  EU  but  leaves  it  to  the  Member  States  to  designate 
enforcement bodies and (for Member States not in the euro area) how precisely to 
implement the interest rates for delayed payments. PO3 leaves the most room for 
interpretation  to  Member  States,  as  they  can  decide  how  payment  envoys  or 
mediation systems are structured. 

8  PREFERRED OPTION 

260.  The assessment of each policy option reveals that each one has the potential for 
benefits but also poses some risks when implemented as a self-standing option. To 
provide the most complete policy response to the general and specific objectives, 
the preferred option is not any single policy option presented so far. Based on our 
analysis, we propose a package of measures, bringing together the most effective 
sub-options  from  PO1,  PO2  and  PO3.  These  sub-options  fulfil  the  efficiency 
criterion both as standalone and in combination, because of lack of overlaps in the 
specific  objectives  they  target.  Combining  them  will  allow  to  ensure  a  single 
efficient and proportionate revision of rules on late payment.  

66 

 
 
 
261.  The  preferred  package  (Error!  Reference  source  not  found.)  consists  of  the 

measures put forward under PO1a, PO2a and PO3b. 

Table 7: Preferred policy package 

Preferred policy package 
Capping at 30 days in B2B transactions  
Verification or acceptance procedure capped at 30 days (no derogation) 
MS facilitate availability and access of SMEs to credit management tools, financial literacy training and 
foster the use by SMEs of digital tools for timely payments  
Making payment of interests automatic (eliminate the concept of ‘entitlement’), clarify dies ad quem, 
making payment of the flat fee compensation automatic 
Leave the rate of interests for late payment as such (ECB+8%) but adapt the flat fee compensation to 
inflation to EUR 50 
MS to designate bodies responsible for the enforcement of the law, carrying out investigations ex officio, 
acting on complaints, and empowered to issue administrative sanctions and publish the name of offenders 
(‘name and shame’). Use of digital tools for more effective enforcement.  
In public works contracts falling within the scope of the PP Directives*,  contracting authorities shall verify 
that payment to the main contractor has been passed onto the subcontractors 
MS to set up a national system of mediation to solve payment disputes in commercial transactions 
Requesting Member States to specifically address the question of unfair contractual terms and practices 
through their applicable national law 

PO  
1a 
1a 

1a 

2a 

2a 

2a 

2a 

3b 

3b 

262.  The  measures  have  been  identified  based  on  the  comparison  of  the  sub-options 
under the three options with the view to best addressing the general objective and 
the specific objectives while satisfying the criteria for effectiveness, efficiency and 
proportionality and having the overall best net impact on key affected stakeholders 
(enterprises and public authorities). 

263.  The  package  joins  together  the  most  effective  sub-options  from  each  PO,  as 
assessed  in  Section  7.  Such  combination  of  measures  can  better  support  the 
achievement of the general and specific objectives, reaching greater effectiveness, 
than each policy option in isolation. However, some benefits also partially overlap, 
as e.g. a company that is already reducing its payment times due to the maximum 
payment  terms  may  not  reduce  it  further  by  the  additional  threat  of  automatic 
interest.  The  reduction  across  the  three  policy  options  has  not  been  added  up 
directly,  but  has  been  combined  to  arrive  at  35%.    We  therefore  conservatively 
assume  that  a  35%  reduction  in  late  payment  is  realistic  by  consolidating  the 
reductions in payment delays of 23.4% from PO1, 17.8% from PO2 and 5.5% from 
PO3 (see section 9). We arrive at this estimate by assuming the full effect of the 
23.4% reduction, but only take 50% of the reduction from PO2 and PO3 as these 
would already be partially covered by the 23.4%. This estimate is conservative so 
as not to overestimate the benefits. The calculation is fully explained in Annex 4. 

264.  The package has several advantages compared to each policy option considered in 
isolation, and largely eliminates the risks inherent to each policy option. Capping 
payment terms  as in PO1a is  likely to be significantly more  effective when it is 
accompanied by strong enforcement measures and deterrents against paying late, 
as provided for in PO2a. The dissuasive power of automatic payment of interest 
and  compensation  will  increase  when  companies’  ability  to  circumvent  these 
provisions by negotiating unfairly long payment terms is restrained. PO2a therefore 
gains in effectiveness when combined with PO1a. 

67 

 
 
265.  Measures considered under PO3b will provide additional support to the package. 
In isolation, PO3b shows low effectiveness compared to the other policy options. 
When considered together with other policy options, PO3b provides useful flanking 
measures for those cases where late payments occur despite measures put forward 
under policy options PO1a and PO2a. PO3b provides effective means of redress to 
the creditor for those cases.  

266.  The consolidated impact of this package will build upon the impacts presented in 
section  6  but  will  achieve  more  synergies.  No  trade-offs  related  to  combining 
policy options have been identified. The summary of costs, benefits and impacts 
on  stakeholders  of  the  preferred  combination  of  policy  options  is  presented  in 
Annex 3. 

267.  This package option is built from the most efficient and effective sub-options as 
analysed in section 7. While another combination of measures would theoretically 
be possible, any other possible combination would be built from less effective and 
efficient sub-options. This is therefore the only package presented as the preferred 
option and it is not further compared to other possible combinations. 

268.  As outlined in this report and for the sake of ensuring legal coherence, the specific 
relationship between the existing UTP and the revised legal text on late payments 
might need  to be clearly presented in the recitals and articles of the new proposal, 
provided  that  this  option  is  legally  feasible,  with  regards  to  all  relevant  legal 
considerations, such as the use of the legal instrument identified and the relevant 
legal basis. This is without prejudice to the option of providing such clarification 
in the context of a revision of the UTP. In case this clarification and alignment is 
legally feasible the new legal instrument might clarify the following: 

1)  The  overall  relationship  between  the  UTP  directive  and  the  late  payment  new 

instrument; 

2)  the introduction of the legal instrument would be without prejudice to the rule in the 
UTP  directive  allowing  Member  States  to  introduce  shorter  payment  periods  when 
transposing the blacklist of prohibited practices of the UTP directive in their national 
legislation; 

3)  the maximum cap period of 30 days would also be applicable to non-perishable food 
products  (these food products  are currently subject  to  a 60-days  cap under the UTP 
directive); 

4)  the 30 days cap in the new late payment legal instrument would be without prejudice 
to  the  specific  rules  applicable  in  the  agri-food  sector  to  value  sharing  agreements, 
payments in the context of the school scheme, and to certain payments in the must and 
wine sector; 

5)  the relationship between the enforcement authorities that would be established in the 
late payment new legal instrument and in the UTP directive; in particular, the new legal 
proposal would need to require that these enforcement authorities coordinate amongst 
each other, including through exchange of information obligations. 

68 

 
 
8.1 

Impact on businesses 

8.1.1  Benefits 

269.  The  benefits  for  businesses,  particularly  those  paid  late,  will  go  beyond  those 
outlined in Section 6 for each individual PO. The reduction in payment terms is 
likely to lead to a reduction of payment times, thanks to the introduction of strong 
enforcement  mechanisms.  Similarly,  creditors  will  obtain  the  same  benefits  as 
presented in  PO2, but  without  the drawbacks of  larger market players imposing 
unfairly long payment terms on them. Creditors who get paid on time will have 
significantly  reduced  enforcement  costs  from  chasing  debtors:  5  man-days  per 
company,  for  a  consolidated  35%  reduction,  equal  to  340.2  million  man-hours, 
equal  to  EUR 8.74  billion  (see  Annex  4)  and  trying  to  negotiate  short  payment 
terms (33% of SMEs, not quantifiable). The net benefit on the entire economy will 
be significant. Despite imposing a cost on debtors, by making them pay on time, 
the economic evidence shows that this is not a zero-sum game. The proposal aims 
to  make  sure that each  company pays itself for  the liquidity  it needs. Currently, 
weaker,  smaller  and  riskier  companies,  which  obtain  funding  at  a  cost  that  is 
proportionate to their levels of risk, fund companies with lower level of risk, for 
whom it is possible to obtain financing at a lower price. Redistributing financing 
cost on fair terms, to include stronger market players, would not only strengthen 
the message that each company is paying for themselves but also it would bring the 
overall cost of financing down. This follows from the fact that the funding granted 
to debtors would likely be at lower prices than the one granted today to creditors. 
Debtors  would  also  benefit  from  increased  certainty  and  predictability  of  cash 
flows from their own debtors, being able to better match in time cash inflows and 
outflows,  and  from  reduced  negotiation  times.  The  value  of  a  company’s 
participation in financial / digital literacy training is estimated between EUR 200 
and EUR 1 800, but the aggregate EU-27 benefit will depend on the choices made 
by Member States’ public authorities. Automatic payment of compensation (PO2) 
represents  benefits  to  creditors  and  a  cost  to  debtors  and  strong  enforcement  is 
estimated to reduce late payment delays by 17.8%. Direct monetary benefits to the 
creditor  that  receives  interest  payment  are  estimated  at  EUR  265.5  million  (see 
Annex 4). Benefits for creditors from the revised compensation fee (to EUR 50) 
amount to EUR 3.75 billion and are a direct cost to debtors, which can be avoided 
by paying on time. Prompt payments to subcontractors in public works contracts 
could unblock up to EUR 31 million of payments a year. Companies are also likely 
to  benefit  from  some  of  the  provisions  under  PO3b,  particularly  from  having 
disputes  resolved  through  mediation  systems  at  a  much  lower  cost  than  court 
proceedings.  PO3b  would  allow  companies  to  save  EUR 27  million  in  avoided 
court cases per year and would bring about a further 5.5% reduction in payment 
delays. 

270.  Besides  the  purely  monetary  net  value  of  costs  and  benefits,  this  option  will 
contribute to  increasing  fairness  in  business  relations.  It  will also  strengthen the 
degree of certainty and predictability in the internal market. The costs for debtors 
mostly  directly  benefit  creditors  and  are  closer  aligned  with  the  flow  of  goods 
and/or  services  in  commercial  transactions.  They  contribute  to  a  fairer  market 
distribution, where each market player pays for the liquidity they use. Moreover, 

69 

 
 
several  non-monetary  benefits  will  accrue  to  businesses.  A  reduction  in  late 
payments will have a positive effect on the well-being of entrepreneurs. 

8.1.2  Costs 

271.  The preferred package imposes costs on businesses. Businesses will need to bear 
the one-off costs presented in Section 6, although with some synergies: both PO1a 
and PO2a showed the one-off adjustment costs of updating standard terms to reflect 
maximum  payment  terms  (EUR  56.1  million)  and  adjusted  compensation  fees 
(EUR 243 million), but if both policy options are adopted together, both changes 
can be made with one adjustment (EUR 243 million). Beyond the one-off costs, 
this preferred package imposes on debtors recurring enforcement cost of automatic 
payment of compensation (EUR 228.3 million interest, EUR 3.23 billion fees) – a 
direct benefit for creditors – and a recurring enforcement cost of direct regulatory 
fines (EUR 136.8 million) (see Annex 4). Debtors can avoid these costs by paying 
on time. They will incur one-off adjustment cost of negotiating funding with their 
bank and lose hassle-free supplier credit. The one-off adjustment cost is considered 
as business-as-usual in the context of their banking relationship. Debtors will likely 
save  on  recurring  interest  expenses  which  would  decrease  to  reflect  their  credit 
rating, compared to the implicit interest cost they bear indirectly through creditors, 
reflecting  creditors’  credit  rating.  It  is  not  possible  to  reasonably  estimate  this 
impact.  Despite these  costs on debtors, the overall net  economic benefit  will be 
positive because cash flows will become more predictable and easier to manage for 
companies. Administrative cost on main contractors in public works contracts for 
providing proof of payment to subcontractors amount to EUR 2.2 million for the 
whole  EU.  Indirect  costs  could  include  reductions  of  income  for  commercial 
providers of financial training or mediation. 

272.  The analysis of impact on SMEs is in Annex 15 and on competitiveness in Annex 

5. 

8.2 

Impacts on public authorities 

273.  The preferred option will confer several benefits to public authorities. The main 
benefit stems from the overall expected reduction in late payments, which means 
fewer  bankruptcies  and  associated  costs  to  the  public  purse.  The  administrative 
fines that national enforcement bodies may collect from companies paying late are 
estimated at up to EUR 136.8 million. Moreover, public authorities should benefit 
from the mediation systems provided in PO3b, both directly (if the public authority 
wishes  to  settle  a  dispute  with  a  supplier)  and  indirectly  (through  relief  on  the 
judicial system). 

274.  Public  authorities  will  face  some  costs.  We  consider  that  recurring  enforcement 
costs  of  verifying  all  purchases  within  30  days  can  be  covered  with  existing 
resources (business-as-usual). Enforcement costs for public authorities are mostly 
one-off  and  negligible  (Ex  post  evaluation  2015).  Providing  access  to  credit 
management and financial / digital literacy training involves some adjustment cost 
which will depend on how Member States structure their support, which is why no 
reasonable  estimate  can  be  given.  Recurring  enforcement  cost  estimates  for 

70 

 
 
automatic payment  of compensation interest  and  fees  in  G2B transactions  equal 
respectively  EUR 37.2  million  and  EUR 0.53  billion  p.a.  These  costs  can  be 
avoided  by  paying  on  time.  The  revision  of  standard  terms  to  include  new 
compensation fees assumed EUR 10 per entity, as in PO2. Those Member States 
that do not  have enforcement bodies or mediation systems  in  place will have to 
designate and run them, incurring one-off adjustment and recurring enforcement 
costs estimated at EUR 60-65 million p.a. (enforcement bodies) and at EUR 10-40 
million p.a. (mediation services). Verifying that subcontractors are paid on time in 
public works contracts under PP directives is left to Member States’ discretion, a 
possible  recurring  enforcement  cost  would  not  require  additional  resources. 
Finally,  some  adjustment  cost  would  be  incurred  for  addressing  the  question  of 
unfair contractual terms and practices through their applicable national law. This 
cost depends on rule-setting mechanisms, which vary by Member State (e.g. federal 
or not) and is therefore difficult to quantify. 

8.3  Policy options related to the form of the legal act 

275.  The measures contained in the Preferred Option can be implemented by either a 
Regulation  or  a  Directive.  The  different  legal  instruments  both  show  certain 
advantages and certain disadvantages when applied to the measures of the Preferred 
Option. 

8.3.1  Advantages and drawbacks of a regulation 

276.  A regulation would contain directly applicable rules on establishing a maximum 
payment term of 30 days in B2B transactions and a maximum of 30 days for the 
verification  procedure,  as  well  as  directly  applicable  rules  that  establish  the 
interests  and  compensation  are  automatic  and  increase  the  compensation  to  50 
euros. It would also contain a directly applicable rule regarding the obligation of 
contractors  to  demonstrate  to  the  contracting  authorities  that  payment  to  their 
subcontractors has taken place or reasons why this has not happened. 

277.  The advantages of these directly applicable rules are that they would be directly 
applicable in all Member States since its entry into force. While national law would 
need to  adjust to  the EU regulation,  there would be no need for a transposition, 
thereby facilitating enforcement. A regulation would be binding so the same rules 
would apply in all Member States, also facilitating legal certainty and control by 
the European Court of Justice. This would deepen the single market and facilitate 
its management.  

278.  On the other hand, a  regulation  would in principle  leave less space for Member 
States to implement specific national rules. That would mean that Member States 
could no longer establish shorter payment terms, sector-specific rules nor shorter 
delays for the verification procedure, if finally no possibility is given to Member 
States  in  these  areas  to  adopt  more  stringent  provisions.  Furthermore,  with  the 
directly applicable provisions of the regulation, interest rates are calculated as ECB 
main refinancing rate +8% and Member States would no longer have freedom to 
establish  higher  interest  rates.  This  would  also  imply  that  existing  national 

71 

 
 
measures that go beyond the rules contained in  the  regulation  would have to  be 
removed unless such discretion is finally given to Member States.  

279.  Possibly certain specific provisions could explicitly allow Member States to adopt 
more stringent provisions, where this is carefully calibrated so as to allow operators 
and national authorities to clearly know which provisions apply. In particular, the 
regulation would lay down such type of other new obligations on Member States, 
namely the obligation to provide credit management and financial literacy training 
and facilitate SMEs access to them, the designation of enforcement bodies with the 
identification of their powers and competences, the obligation to set up mediation 
services to solve payment disputes, the effect of certain unfair payment clauses or 
practices.  As  these  provisions  are  not  directly  applicable,  it  would  be  up  to  the 
Member States to further design them and implement them. 

8.3.2  Advantages and drawbacks of a Directive 

280.  A  directive  would  amend  the  existing  LPD,  limited  to  introducing  the  specific 
proposals identified in the Preferred Option. It would leave margin of manoeuvre 
for  Member  States,  namely,  regarding  the  30  days  maximum  payment  term,  in 
which case Member States would remain free to introduce stricter measures, more 
favourable  to  the  creditor.  The  rules  on  interests  and  compensation  will  be 
automatic and the compensation will be increased to 50 euros, as under the option 
of  the  regulation.  However,  with  a  Directive,  Member  States  would  continue  to 
remain free to apply higher interest rates as long as the formula ECB main rate + 
8% is respected. 

281.  The advantage of a directive is that it would give additional flexibility to Member 
States to adopt stricter rules than the EU rules or additional measures that are more 
beneficial for the creditor (e.g. shorter payment terms, or specific payment terms 
for identified sectors). Revising the rules with a directive would also be simpler, as 
it would be based on the already existing directive. Furthermore, existing national 
measures, that were adopted as part of the transposition of the LPD or as part of its 
implementation  that  do  not  exceed  the  caps  and  values  laid  down  in  the  new 
identified options could be maintained. 

282.  The disadvantages of a directive include the time needed to transpose the directive 
into  national  law.  In  addition,  there  is  a  risk  of  “gold-plating”  as,  for  example, 
Member States would remain free to introduce verification procedures for contracts 
even where these procedures might not be actually needed. 

8.3.3  Assessment  of  the  legal  choice  against  effectiveness,  efficiency,  proportionality, 

coherence and subsidiarity 

Table 8: Comparison based on effectiveness, efficiency, proportionality, coherence and subsidiarity 

Effectiveness  Efficiency  Proportionality  Coherence 

Subsidiarity 

Regulation 

Directive 

+++ 

++ 

++ 

+ 

+ 

+ 

+ 

++ 

- 

+ 

72 

 
 
 
283.  Both  a  regulation  and  a  directive  are  effective,  efficient  and  coherent  legal 
instruments  to  achieve  the  objectives  of  the  above-stated  policy  measures.  A 
regulation is judged to be more effective than a directive as it is directly applicable; 
enforcement against common rules across the EU would be simpler for businesses 
to understand. A regulation is also judged to be more efficient than a directive, as 
it would be applicable without having to wait for transposition into national law. 

284.  A directive is assessed to be more coherent with other EU and national legislation 
than a regulation, as it would, in principle, not require the repeal of existing stricter 
national legislation. Similarly, a directive is deemed to be more respectful of the 
principle of subsidiarity, as it would allow Member States the flexibility to adopt 
additional measures which are more beneficial to the creditor and would provide 
more freedom to Member States in the implementation. 

285.  Overall, in light of the increased effectiveness and efficiency, the preferred form 
for the legal act is that of a regulation. It would take effect more quickly, be more 
easily enforceable and offer clear rules for businesses, applicable across the entire 
EU; it would in essence offer quicker relief for SMEs. 

8.4  REFIT (simplification and improved efficiency) 

286.  Simplification  and  improvements  should  follow  from  the  change  of  legal 
instrument to a regulation. A regulation would be directly applicable in all Member 
States and would facilitate enforcement by not requiring transposition checks and 
not  entailing  infringement  proceedings.  A  regulation  would  be  binding  in  its 
entirety so the same rules would apply in all Member States, also facilitating legal 
certainty  and  control  by  the  European  Court  of  Justice.  This  would  deepen  the 
single market and facilitate its functioning for companies and management for the 
Commission and Member States’ public authorities.  

8.5  Application of the ‘one in, one out’ approach 

287.  Businesses will need to bear the one-off adjustment cost of updating standard terms 
to reflect maximum payment terms and adjusted compensation fees (estimated at 
EUR 243 million).The other quantifiable administrative cost related to one-in-one-
out concerns the measure related to verification that payment to the main contractor 
has been passed onto the subcontractors in public works contracts. This recurring 
administrative cost for businesses has been estimated at EUR 2.2 million. This will 
mostly affect large or mid-sized companies. The magnitude of impact is considered 
insignificant (0.5 man-hour, per company, per year). No quantifiable administrative 
cost savings seem to stem from the preferred policy option. 

9  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

288.  The degree of success of the initiative will be measured according to the targets set 

out below.  

73 

 
 
Table 9: The targets for future assessment 

Indicator 
Reduce by 35% the proportion of companies which report late payments as an 
issue; the progress will be measured against the benchmark value from the 2022 
SAFE survey for all companies 
Reduce by 35% the proportion of companies from individual size classes, which 
report  late  payments  as  an  issue;  the  progress  will  be  measured  against  the 
benchmark values from the 2022 SAFE survey for size classes (in 2022 between 
40% and 48% of companies from each size class reported regular or occasional 
occurrences of late payments126); 

Target 
28% 

Baseline 
43% 

m: 26% 
S: 29% 
M: 31% 

m: 40% 
S: 44% 
M: 47% 

289.  The Commission would monitor and evaluate the impacts of the proposed policy 
option on late payments after four years from its entry into force. The application 
of the EU rules and their impact could be monitored based on annual reports usually 
produced by Member States on their own initiative127. Such reports usually include 
detail on the payment performance of B2B in Member States and the compliance 
with the rules set at EU level, as well as the activity of enforcement authorities in 
terms of e.g. the number of complaints received and the number of investigations 
launched.  The  annual  reports  should  be  discussed  by  the  Commission  and  the 
national  competent  authorities.  The  current  pilot  EU payment observatory could 
also support with thematic reports where necessary. 

290.  Further  information  including  a  non-exhaustive  list  of  possible  monitoring 

indicators is shown in Annex 24. 

l’Observatoire  des  délais  de  paiement  (Banque  de  France) 

126 SAFE Survey, 2022 
127  France:  Rapport  Annuel  de 
https://publications.banque-france.fr/liste-chronologique/rapport-de-lobservatoire-des-delais-de-paiement 
Spain: https://www.hacienda.gob.es/es ES/CDI/Paginas/PeriodoMedioPago/PeriodoMedioPago.aspx 
Portugal : https://www.dgo.gov.pt/noticias/Paginas/PMP.aspx 
Italy: https://www.mef.gov.it/operazione-trasparenza/pagamenti/ind_temp/index.html 
Italy: https://www.mef.gov.it/focus/Pagamento-debiti-della-PA-ai-creditori/ 
Belgium:https://bosa.belgium.be/fr/themes/budget-et-comptabilite/la-comptabilite-publique/suivi-des-
delais-de-paiement 
Netherlands: the Ministry for the Economy reports regularly to the Parliament information about the payment 
performance of the Dutch provinces. 

74 

 
 
 
 
 
 
A.  ANNEX 1: PROCEDURAL INFORMATION  

1. 

LEAD DG, DECIDE PLANNING/CWP REFERENCES  

291.  This  Impact  Assessment  Report  was  prepared  by  DG  Internal  Market,  Industry, 

Entrepreneurship and SMEs (DG GROW.A.2 SME unit).  

292.  The  DECIDE  Planning  reference  of  the  initiative  ‘Revision  of  EU  rules  on  late 
payments (Late Payments Directive)’ is PLAN/2022/1955. The initiative is in the 
2023 Commission Work Programme under the heading ‘A Europe fit for the digital 
age – SME relief’. 

2. 

ORGANISATION AND TIMING  

293.  Three Inter-Service Steering Group (ISSG) meetings, consisting of representatives 
from various Directorates-General of the Commission, were held in 2022 and 2023 
during the preparation stage of this impact assessment.  

294.  The  first  meeting  took  place  on  24  November  2022,  attended  by  the  Secretariat 
General,  the Legal  Service, AGRI, EMPL, ENER, GROW  and REFORM. Also 
JRC attended. 

295.  The  second  meeting  was  held  on  9  March  2023,  attended  by  the  Secretariat 
General, AGRI, COMP, ECFIN, EISMEA, ENER, GROW, JUST, REFORM and 
TAXUD. The Legal Service was excused but sent comments by email prior to the 
meeting. 

296.  The third meeting was held on 28 March 2023. Representatives from the Secretariat 
General,  the  Legal  Service,  AGRI,  COMP,  ECFIN,  EISMEA,  FISMA,  JUST, 
TAXUD, and GROW were present. 

297.  All the meetings were chaired by DG GROW.  

298.  DG GROW has considered the comments made by DGs in the intermediate and 

final version of the IA.  

3. 

CONSULTATION OF THE REGULATORY SCRUTINY BOARD  

299.  An Upstream meeting with the Regulatory Scrutiny Board was held on 17 February 
2023.  The  impact  assessment  was  submitted  to  the  RSB  on  12  April  2023.  The 
impact  assessment  was  discussed  with  the  RSB  on  10  May  2023,  and  the  RSB 
issued a positive opinion with  reservations on 12 May 2023. Based on the RSB 
recommendations, the impact assessment has been revised in accordance with the 
following points. 

RSB Recommendations 

Revisions introduced 

(B) Summary of findings 

75 

 
 
 
(1) The report does not sufficiently explain 
the  choice  of  a  Regulation  rather  than  a 
Directive as the preferred legal instrument 
to address the identified problems. 

300. 

(2)  It  does  not  sufficiently  assess 
and  compare  the  impacts  of  the 
options  as  a  Regulation  or  as  a 
Directive respectively. 

301. 

(C) What to improve 

302. 

303. 

(1)  The  report  should  clearly 
outline those provisions that would 
be  directly  applicable  and  those 
that  leave  discretion  to  Member 
States.  It  should clarify how these 
provisions  fit  best  in  one  legal 
instrument  or  another  (Regulation 
or  Directive).  In  the  case  of  the 
definition  of  ‘unfair  practices’,  it 
should explain how leaving this to 
Member States is compatible with 
the need for legal certainty. 

(2)  The  report  should  assess  the 
impacts  related  to  the  choice  of 
legal  delivery 
instrument  and 
compare  the  options  in  terms  of 
effectiveness, 
and 
coherence  under  each  instrument. 
To inform better the policy choice, 
the 
it  should  better  describe 
advantages  and  disadvantages  of 
the preferred legal instrument. 

efficiency 

The report has been significantly revised to 
include  the  choice  of  a  regulation  vs.  a 
directive as a fully assessed policy choice 
in section 8. Section 8 has been revised to 
show  clearly  how  a  Regulation  or  a 
the  policy 
Directive  would  apply 
to 
measures  contained 
the  Preferred 
in 
Option. Furthermore, section 5.3 has been 
revised  to  explain  clearly  the  differences 
between a Regulation and a Directive. 

The  two  options  for  the  legal  form  have 
been  compared  to  each  other  against  the 
criteria  of 
efficiency, 
effectiveness, 
coherence, proportionality and subsidiarity 
in  section  8.  Advantages  and  drawbacks 
for each choice have been explicitly added 
in order to allow for an informed political 
choice. 

The possible legal instruments (Regulation 
and  Directive)  have  been  explicitly 
clarified and described in sections 5.3 and 
8. Section 5.3 now clearly explains how a 
regulation  would  differ  from  a  directive. 
Section  8  now  explicitly  describes  how 
each policy measure would be applied both 
under  a  regulation  and  under  a  directive. 
For  the  definition  of  unfair  practices,  the 
report  has  been  revised  to  clarify  how 
leaving 
is 
compatible with a regulation. 

to  Member  States 

this 

effectiveness, 

instrument  against 

Section 8 has been substantially revised to 
include a full comparison of the choice of 
the 
legal  delivery 
efficiency, 
criteria  of 
and 
coherence, 
subsidiarity. 
and 
disadvantages  of  both  legal  instruments 
to  section  8.  The 
have  been  added 
preferred  legal  instrument  now  follows 
directly  from  the  comparison  above  in 
order to fully inform the policy choice. 

proportionality 
Advantages 

304. 

(3)  The  coherence  of  the  options 
with the Directive on unfair trading 

The  report  now  clearly  outlines 
the 
interplay  between  the  proposed  new  late 

76 

 
 
 
305. 

306. 

307. 

practices  in  the  agricultural  and 
food  supply  should  be  presented 
clearly. 

(4) The report should strengthen its 
subsidiarity  analysis.  It  should 
that  Member 
provide  evidence 
States cannot address the identified 
problems  on  their  own  and  show 
that there is an actual risk of market 
fragmentation  in  the  absence  of 
EU-level action. 

(5)  The  report  should  provide  a 
clear  split  between  Business-to-
Business 
and  Government-to-
Business  transactions  throughout 
the document, in particular for the 
problem definition and the problem 
drivers. 

of 

the 

(6)  The  report  should  strengthen 
impact  analysis.  It  should 
the 
further  explain  and  justify  the 
assumption 
expected 
reduction  in  late  payments  under 
the  preferred  combination  of 
options.  It  should  also  provide  a 
summary of the costs and benefits 
including  net 
for  all  options, 
benefit/cost  estimates  and  Benefit 
Cost Ratios. 

308. 

(7) The report should improve the 
comparison  of  options  based  on 
effectiveness, 
efficiency, 
coherence, 
and  proportionality 
with  a  clearer  justification  of  the 
scoring.  Effectiveness  of  options 
should  be  assessed  against  their 
delivery on the specific objectives. 

payments 
the  UTP 
instrument  and 
Directive in section 5. In addition, section 
7 now explains more clearly the coherence 
of the proposed policy options with other 
EU  legislation,  including  with  the  UTP 
Directive. 

Section  7  has  been  revised  to  assess  all 
policy  options  against  subsidiarity.  All 
policy  options,  including  the  choice  of 
legal  instrument,  are  now  assessed  as  to 
how  well  they  respect  the  principle  of 
subsidiarity, and why the Preferred Option 
only  addresses  the  issues  that  Member 
States  cannot  adequately  address  on  their 
own. 

Section  2  has  been  revised  to  highlight 
more  explicitly  the  differences  between 
Business-to-Business and Government-to-
the 
Business 
document,  where 
is 
presented,  it  has  been  highlighted  more 
clearly which data refers to B2B and G2B 
transactions. 

transactions.  Throughout 
relevant  data 

The impact analysis has been strengthened. 
The  assumptions  underlying  the  expected 
reduction under the preferred combination 
of options have been explicitly spelled out 
in Section 8 and the associated calculations 
have  been  introduced  in  Annex  4.  A 
summary table of the costs and benefits for 
all  options,  including  net  benefit/cost 
estimates and benefit cost ratios has been 
introduced at the beginning of Section 7. 

A  full  comparison  of  all  options  against 
coherence and subsidiarity has been added 
to  section  7.  The  explanation  of  options 
and  the  summary  table  at  the  start  of 
section  7  now  more  clearly  explain  the 
justification of the scoring. 

77 

 
 
 
4. 

EVIDENCE, SOURCES AND QUALITY  

309.  The impact assessment draws on an extensive amount of desk research, external 
studies, an evaluation carried out in 2015 and wide-ranging consultations described 
in  detail  in  Annex  2.  The  input  from  these  consultations  was  collected  and 
processed by the experts in the SME Unit of DG GROW (GROW A2). 

310.  Data and information were collected, amongst others, from the following sources: 

Table 10: Sources of information 

Sources 

Information/Summary 

Formal evaluation of Directive 

Commission  Report  to  the  EP 
the 
EC 
and 
implementation (2016) 

the 

on 

Evaluation 

Ex-post 
the 
https://publications.europa.eu/en/publication-detail/-/publication/400ecc74-
9a54-11e5-b3b7-01aa75ed71a1 

Payment 

Late 

Directive 

of 

This  is  the  final  report  of  the  evaluation  of  the  Late  Payment  Directive 
2011/7/EU  –  carried  out  by  an  external  contractor  in  2015.  The  study 
considered  the  following  evaluation  dimensions:  relevance,  effectiveness, 
efficiency,  coherence  and  complementarity,  and  EU  added  value  –  shortly 
after the deadline for transposition (16/3/2013). 

Commission Report to the European Parliament and to the Council on the 
implementation of the Late Payment Directive ( and supporting SWD): COM 
(2016) 534 final 

This  report  was  provided  in  response  to  the  requirement  established  under 
Article  11  of  Directive  2011/7/EU  in  order  to  monitor  progress  on  the 
implementation of the Directive and to ensure that it is on track to deliver its 
expected benefits.  

Late  Payments  and  Firms`: 
Evidence  from  the  EU,  JRC 
Study (2018) 

Conti,  M.,  Elia,  L.,  Ferrara,  A.  and  Ferraresi,  M.,  Governments`  Late 
Payments  and  Firms`  Survival:  Evidence  from  the  European  Union,  JRC 
Study https://publications.jrc.ec.europa.eu/repository/handle/JRC121059 

The study examined to what extent stricter regulations addressing payment 
backlogs, brought about by the EU directive on late payments, have affected 
firms’ performance. The focus is on government-to-business activities and on 
the firms’ responses to the introduction of these regulations. 

B2B  transactions:  comparative 
analysis  of  legal  vs.  soft-law 
improving 
for 
instruments 
payment behaviour (2018) 

soft-law 

Business-to-business transactions: a comparative analysis of legal measures 
vs. 
behaviour 
https://publications.europa.eu/en/publication-detail/-/publication/c8b7391b-
9b80-11e8-a408-01aa75ed71a1/language-en/format-PDF/source-103408786  

instruments 

improving 

payment 

for 

The  study  made  a  mapping  of  measures  (hard  law  and  soft  measures) 
implemented by Member States to support their national transposition of the 
Directives. The contractor extrapolated from them a set of recommendations 
indicating  as  to  whether  the  provisions  of  the  Directive,  relevant  to  B2B 
transactions, are fit for purpose or whether other actions and policies, outside 
the  scope  of  the  Directive,  can  actively  support  the  achievement  of  its 
objectives in the B2B environment. 

Resolution 

EP 
implementation  of 
Payment  Directive 
2019) 

on 
the 
the  Late 
(adopted 

European Parliament Resolution on the implementation of the Late Payment 
Directive 
https://www.europarl.europa.eu/doceo/document/TA-8-2019-
0042_EN.html 

78 

 
 
Sources 

Information/Summary 

Opinion  of  the  Fit  for  Future 
Platform  on  the  Late  Payment 
Directive (2021) 

Opinion  of  the  Fit  for  Future  Platform  on  the  Late  Payment  Directive 
https://ec.europa.eu/info/sites/default/files/final_opinion_2021_sbgr2_06_lat
e_payments.pdf  

Building a responsible payment 
culture, EC study (2022) 

Building a responsible payment culture – improving the effectiveness of the 
Late 
Directive.https://op.europa.eu/en/publication-detail/-
/publication/cb4bc1bd-1467-11ed-8fa0-01aa75ed71a1/language-en/format-
PDF/source-search 

Payment 

The  study  collected  evidence  and  provided  inputs  on  a  series  of  possible 
actions  aimed  at  fostering  the  effectiveness  of  the  LPD.  The  work  was 
articulated in 6 thematic areas, dealing respectively with: (i) identifying the 
conditions for the creation of an EU observatory on payment behaviour; (ii) 
facilitating the uptake of financial tools addressing the issues originated by 
poor payment behaviour and fostering the use of e-invoicing; (iii) facilitating 
access  to  credit  information  on  prospective  clients;  (iv)  implementing 
synergies  between  public  procurement  and  prompt  payment  objectives;  (v) 
fostering  the  use  of  Alternative  Dispute  Resolution  tools  to  settle  payment 
delays disputes; and (vi) enhancing SMEs’ credit management capabilities. 
The  study  relied  on  a  combination  of  desk  work  and  interactions  with 
stakeholders, including: (i) the review of over 250 documentary sources and 
some  150  websites;  (ii)  interviews  with  representatives  of  more  than  100 
entities  (Member  States  authorities,  business  associations  &  professional 
groupings,  enterprises,  academicians,  etc.);  (iii)  two  targeted  consultations 
with  ADR  professionals  and  public  procurement  authorities,  and  (iv)  a 
consultation  with  some  700  SMEs,  implemented  through  the  Enterprise 
Europe Network. 

Assessing  the  economic  impact 
of  faster  payments 
in  B2B 
transactions, JRC Study (2022) 

Ferrara  A.,  Ferraresi  M.  (2022),  Assessing  the  economic  impact  of  faster 
payments  in  B2B  commercial  transactions.  Final  Report,  JRC  Study 
https://publications.jrc.ec.europa.eu/repository/handle/JRC130205 

The  present  study  sets  an  empirical  framework  to  estimate  the  economic 
impact of capping the payment term in B2B commercial transactions to 30 
and 60 days, considering a panel of nine European countries. It implements 
the statistical technique known as difference-in-differences (DiD) to estimate 
the impact of the LPD-B2B, on firms’ performance. Results indicate that the 
LPD  has  been  associated  with  higher  cash  flow  in  firms  that  were 
experiencing longer time to collect their credits in the past. 

SME Performance review 

SME Performance Review (europa.eu) 

European  Payment  Report  – 
INTRUM (different years) 

The  SME  performance  review  is  one  of  the  main  tools  the  European 
Commission uses to monitor and assess countries' progress in implementing 
the  SME  strategy  and  the  Small  Business  Act.  With  an  emphasis  on  the 
priorities  under  the  SME  strategy  and  the  SBA,  the  review  brings 
comprehensive information on the performance of SMEs.  

https://www.intrum.com/publications/european-payment-report/  

The European Payment Report (EPR) describes the impact late payments has 
on the development and growth among European businesses. The insights are 
based on a survey of more than 11,000 companies in 29 European countries. 
The survey is conducted annually, based on a set of fixed questions combined 
with a set of questions on a relevant topic. 

79 

 
 
Sources 

Information/Summary 

SAFE 
Central Bank 

survey  –  European 

https://www.ecb.europa.eu/stats/ecb_surveys/safe/html/index.en.html  

The  survey  on  the  access  to  finance  of  enterprises  (SAFE)  provides 
information  on  the  latest  developments  in  the  financial  situation  of 
enterprises, and documents trends in the need for and availability of external 
financing.  The  survey  results  are  broken  down  by  firm  size,  branch  of 
economic activity, country, firm age, financial autonomy and ownership. 

The survey is conducted twice a year. 

Eurobarometer surveys 

https://europa.eu/eurobarometer/surveys/detail/2244 

Eurobarometer is the polling instrument used by the European Commission, 
the European Parliament and other EU institutions and agencies to monitor 
regularly  the  state  of  public  opinion  in  Europe  on  issues  related  to  the 
European Union as well as attitudes on subjects of political or social nature. 
Eurobarometer  provides  quality  and  relevant  data  for  experts  in  public 
opinion, researchers, media and the public.  

For this impact assessment, we have consulted the survey on SMEs, start-ups, 
scale-ups and entrepreneurship – which also includes questions on payment 
behavior. 

D&B payment survey 2022 

https://www.dnb.com/en-ch/knowledge/study/payment-study-2022-
download/ 

Dun & Bradstreet publishes annual reports outlining the international picture 
of payment practices. Data is collected from a large variety of countries and 
economic  areas  (e.g.  Belgium,  the  Netherlands,  Luxembourg,  Germany, 
France, the UK, Spain, Portugal, Ireland, Slovenia, Poland, Finland, Russia, 
Türkiye,  Greece,  Bulgaria,  Romania,  Serbia,  Croatia,  Sweden,  Hungary, 
Denmark, Czech Republic, Slovakia, Switzerland and Egypt, but also China 
Mainland,  Taiwan  Region,  Hong  Kong  SAR,  Philippines,  Singapore, 
Thailand, India, Israel, UAE, Mexico, United States, Canada, Singapore). For 
each market the patterns of commercial transactions are analyzed in detail, 
paying attention to any changes compared with the previous years. 

https://single-market-economy.ec.europa.eu/smes/sme-strategy/sme-
performance-review_en 

The study present a granular analysis of the economic impact of a sustained 
high inflationary environment on the EUs’ 23 million SMEs. Based on this 
analysis, the study identifies SME groupings at particular risk and maps and 
proposes policy responses on the national as well as the EU level, on the level 
of the 14 industrial ecosystems, with a view to identify a set of good policy 
practices and recommendations for policy makers. This study covers the EU 
Member States. 

Atradius  conducts  annual  reviews  of  international  corporate  payment 
practices through a survey called the ‘Atradius Payment Practices Barometer’. 
Several regional (eg Western Europe, Eastern Europe, etc…) but also sectoral 
reports  are  published  every  year,  surveying  many  aspects  of  companies’ 
behavior in relation to payments and the impact on business decisions. 

The  effect  of  inflation  on  late 
payments, 2023, to be published 
(SPR) 

Atradius,  Payment  Practice 
Barometer, 2017 

80 

 
 
 
 
 
 
 
 
 
B.  ANNEX 2: STAKEHOLDER CONSULTATION (SYNOPSIS 

REPORT) 

311. 

In  accordance  with  the  consultation  strategy,  the  objective  of  the  consultation 
activities was to gather data evidence and stakeholder views on a possible revision 
of the late payment directive.  

312.  Feedback obtained from stakeholders via the different tools mentioned below will 
contribute  to  the  analysis  (triangulation  of  information)  together  with  evidence 
from different sources including desk-research. 

313.  This annex is structured in two main chapters: 

314.  Chapter  I  –  Consultation  activities  and  sources  of  information  presents  the 
description of the methodology that the services of the Commission have used e.g. 
PC,  SME  panel,  consultations  of  Member  States  and  expert  groups,  studies, 
interviews. It also provides information on the main stakeholders’ groups. 

315.  Chapter  II  –  Result  of  the  consultation  activities  analyses  the  results  of  the 
consultation activities by the main dimensions of the policy options as presented in 
the impact assessment. 

CHAPTER I - CONSULTATION ACTIVITIES AND SOURCES OF 
INFORMATION 

1. 

STAKEHOLDER GROUPS RELEVANT FOR THE CONSULTATION ACTIVITIES 

316.  According with the consultation strategy, the relevant stakeholder groups are: 

1)  Authorities in Member States (national, regional, local authorities); 
2)  Business 

particular  SME 
representatives, 
associations/organisations at the EU and national level, including from sectors where 
working capital requirements are high; 

associations 

and 

and 

in 

3)  The Late Payment Expert group, composed of representatives of Member States, in 

charge of the implementation of the LPD; 

4)  The  Industrial  Forum,  composed  of  representatives  of  national  Ministries  of 
Economy/Industry,  sectoral  organisations,  SME  organisations,  civil  society,  NGOs, 
the EESC and the Committee of the Regions. 

2. 

CONSULTATION ACTIVITIES AND OTHER INFORMATION SOURCES  

317.  The services of the Commission have used a wide range of methodological tools 
for the consultation activities for this initiative. Consultations started in 2023. In 
particular the following activities were carried out:    

81 

 
 
 
 
 
 
2.1.  THE COMMISSION PUBLISHED A CALL FOR EVIDENCE ON THE INITIATIVE.  

318.  The feedback period started 12 January 2023 with a deadline for feedback from 
stakeholders  by  17  March  2023.  In  total,  137  stakeholders  provided  feedback. 
Amongst the respondents there were business associations (42), companies (28), 
public authorities (26), citizen (24) and other organisations (17). They were from 
Italy (23), France (21), Spain (17), Belgium (17), Austria (10), Luxembourg (8) 
and Slovakia (7). There was a small number of contributions from 12 other Member 
States  and  few  from  non-EU  countries.  (Summary  available  in  section  3  of  this 
annex). 

2.2. 

 PUBLIC CONSULTATION (THE SUMMARY REPORT IS AVAILABLE ONLINE128) 

319.  The consultation was published on 12 January 2023 and responses were accepted 
until  17  March  2023.  117  organisations  and  individuals  responded  to  the 
consultation. Most responses came from Germany and Belgium (14,5%), followed 
by Italy (13,7%), France (12,8%) and the Spain (12%). There was a small number 
of replies from most other Member States. Few responses were also received from 
non-EU countries.  

320.  18 public authorities from 7 Member States, Austria, Czechia, Estonia, Germany, 
Italy,  Netherlands  and  Slovenia  participated  in  this  consultation.  22,2%  of 
responses (26 out of 117) came from companies. 12 were large companies (250 or 
more employees),6 medium (50 to 249 employees), 3 small (10 to 49 employees) 
and 5 micro (1 to  9 employees). All  responding  companies  were registered in  a 
Member  State  (Austria,  Bulgaria,  Czechia,  France,  Germany,  Greece,  Malta, 
Poland, Romania, Spain and Sweden,) and one in Switzerland. 

321.  Some  questions  were  targeted  at  companies.  It  was  also  possible  to  provide 
additional  information  through  open  questions.  Respondents  made  use  of  these 
options and not all replied to all questions. 

2.3.  SME PANEL CONSULTATION129  

322.  This consultation took place between 26 January and 16 March 2023. In total, 939 
SMEs replied to this consultation in the EU Survey webpage. Most responses came 
from Spain (457), Italy (182), Poland (110), followed by Romania (48), Portugal 
(43), France (27), Austria (19) and Hungary (10). There were a few replies from 

128  https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13665-Late-payments-update-
of-EU-rules/public-consultation_en  
129  The  SME  panel  is  a  tool  that  allows  Commission  service  to  reach  SMEs  in  a  targeted  way  and  are 
organised in cooperation with the partners in the Enterprise Europe Network, a support network for small 
and medium-sized enterprises (SMEs) bringing together, among others, chambers of commerce and industry, 
regional development organisations or innovation support organisations. 

82 

 
 
 
 
 
 
 
Belgium,  Bulgaria,  Czechia,  Denmark,  Germany,  Greece,  Latvia,  Lithuania  and 
Finland and a couple or individual responses from some other Member States and 
non-EU countries (Estonia, Ireland, and Norway).  

323. 

In terms of their size, 40,3% were micro companies with 1 to 9 employees (378 out 
of  939),  37%  small  companies  with  10  to  49  employees  (347),  13,6%  medium 
companies with 50 to 249 employees (128) and 9,2% self-employed (86). 

324.  The results of the SME panel are presented in a specific report,  Annex 16 They 

were also used for the SME Test, Annex 15. 

2.4.  MEETINGS 

325. 

In line with the consultation strategy, a large number of meetings took place, either 
bilateral with individual stakeholders or with designated groups of experts: 

1)  European business associations representing companies and in particular SME such as 
SMEunited,  BusinessEurope,  Eurocommerce,  Eurochambres,  Cooperatives  Europe, 
Family Business Europe, European Builders Confederation 

2)  National  business  organisations  such  as  CEPYME  (Spain),  Confcommercio  (Italy), 
IAPMEI  (Portugal),  Association  Française  des  Credit  Managers  &  Conseils,  Dutch 
Royal Metaalunie 

3)  Members  of  other  EU  institutions  such  as  EP  members  (Renew  group),  EESC 
(employers group) or national institutions such as the Assemblée Nationale (France).  

4)  Specialised groups such as the Industrial Forum or the SME Envoys Network 
5)  2  hybrid  meetings  were  held  with  the  Commission  Late  Payment  Expert  group 
(E02710) bringing together Member State representatives from Ministries responsible 
for company law issues on 10 October 2022 and 13 January 2023130. 

326.  The list of bilateral meetings is included in Annex 21. 

CHAPTER II – RESULT OF THE CONSULTATION ACTIVITIES 

327.  The first section of this chapter analyses the results of the consultation activities. 
Where  the  views  of  different  stakeholder  groups  on  the  same  topic  were 
substantially different, they are analysed and presented separately. 

328.  The second section presents a summary of the feedback received by stakeholders 

on the call for evidence.  

3. 

SECTION 1: ANALYSIS OF RESULTS 

329.  For ease of presentation, the results are regrouped under the policy options of the 

impact assessment. 

130 Register of Commission expert groups and other similar entities (europa.eu) 

83 

 
 
 
 
3.1.  INTRODUCTION – SIZE OF THE PROBLEM  

330.  Late payments heavily affect businesses and in particular SMEs.  

331.  According to the result of the SME Panel, the number of invoices sent to the clients 
which are paid late is quite significant as only 3,4% of the respondents (32 out of 
939) stated that no invoices were paid late. The majority (45,3% or 425) declared 
that  between  1  and  10%  of  their  invoices  are  paid  late,  272  (29%)  replied  that 
between 10 and 25% of the invoices are paid late, 120 (12,8%) declared between 
25% and 50% and 66 (7%° reported that more than 50% of their invoices are not 
paid on time. This is reflected by the replies concerning the turnover. Only 3,3% 
of  the  respondents  (31  out  of  939)  stated  that  their  business  turnover  was  not 
affected by the late payment of the invoices. 395 (42,1%) respondents replied that 
1  to  10%  of  the  turnover  was  affected,  255  (27,2%)  between  10  and  25%,  145 
(15,4%) between 25% and 50% and 84 (8,9%) more than 50%.  

332.  A  very  large  majority  of  the  respondents  strongly  agreed  or  agreed  that  late 
payments affect their wellbeing and generate stress and anxiety (91,7% or 861), 
affect  the  survival  of  their  business  (80,3%  or  754)  and  affect  their  trust  in  the 
market (78,5% or 737). 

3.2.  POLICY OPTION 1: PREVENT LATE PAYMENTS 

333.  The respondents to the SME Panel largely supported the proposal to setting a limit 
for the maximum number of days for payment terms in B2B (82,7%, 777 out of 
939 respondents considered it very useful/useful).  

334.  There is a preference for capping the payments terms at 30 days or at 60 days in 
B2B transactions. 36,4 % (341 out of 939) participants to the SME Panel preferred 
30 days as maximum payment term, in particular the ones active in professional, 
scientific and technical activities (49% of them selected it), other services activities 
(41%), construction sector (39%) and wholesale and retail (38%). 27,8% (261) of 
the SMEs indicated 60 days, in particular the ones active in mining and quarrying 
(42%) and manufacturing (35%). Only 7,5% (70) of respondents did not agree with 
setting a maximum payment term.  

335. 

In fact, this is also the current normal practice reported by the respondents to the 
Panel. In general, they ask for payments within 30 days of the date of the invoice 
(43,8% of respondents or 411 out of 939) or within 30 to 60 days (41,7% or 392). 

336.  On their side, the results of the PC show that 36,7% (43) of the 117 respondents 
think that the payments terms should be capped for all B2B transactions without 
exceptions, and more specifically at 30 days (27,3% or 32) or 60 days (9,4% or 11). 
There are significant differences among companies (58% of them are in favour of 
30  or  60  days  capping),  public  authorities  (33%  in  favour)  and  business 
organisations (24% in favour). 29% of the respondents, a little bit more business 
association (35%) and companies (31%) than public authorities (28%), think that 
the  payments  terms  should  remain  unchanged.  Only  8,6%  (10,  business 

84 

 
 
associations only) think that they should be capped at 30 (6%) or 60 days (2,6%) 
for payments from large companies to SMEs only.  

337.  The results of the PC also show a wide support to the proposal to provide training 
on credit management and financial literacy (73,5% or 86 out of 117 of respondents 
think  that  this  could  have  very  positive  or  positive  impact)  and  to  improve 
availability  of  measures  dedicated  to  foster  digital  skills  in  particular  in  SME 
(71,8%, 84 out of 117). 46,1% (54 out of 117) of the respondents supported the 
setting  up  of  a  permanent  European  Observatory  of  payments  managed  by  the 
Commission to monitor payment performance and trends in payments. 

338.  The other consultation activities (feedback to the call for evidence, position papers 
and bilateral meetings) showed that there is a significant majority supporting the 
capping. They were mostly business associations representing in particular SMEs 
(for  example  SMEunited,  European  Builders  Confederation  and  ESBA)  and 
companies  (especially  SMEs)  but  also  some  public  authorities  and  citizens. 
Generally,  they  support  a  limit  of  30  days  or  less  for  payment  terms  B2B 
transactions.  Some stakeholders despite favouring a general  capping  also favour 
certain level of flexibility when it comes to certain specific sectors or to allow an 
agreement between the creditor and the debtor under certain conditions. Most of 
them agree for an extra 30 days (60 days total), although some push for more days 
by  claiming  for  respect  to  the  ‘freedom  of  contract’  principle  between  its 
participants. Only few are against establishing limits to payments of invoices. Most 
of them claim for respect to the principles of  ‘freedom of contract’  and ‘private 
autonomy’  to  sustain  their  arguments.  They  are  in  general  national  business 
associations or similar bodies (for example, AT and DK chambers, Confcommercio 
from IT) and a couple of citizens and public administrations (national and local PA 
from IT, DE, MT, FI). On the concept of ‘Gross unfairness’, the positions in favour 
of capping payment terms, also favour its abolition from the directive; while does 
against capping are also against of any clarification or guidance on this concept. 

339.  Overall,  the  stakeholders  support  the  proposal  to  provide  training  on  credit 
management  and financial literacy.  They were mostly  business  associations (for 
example CECOP and DK chamber of commerce). They propose the sourcing of 
better education to inform best practice, and to build this into all small business 
training and support. Also, they propose facilitating availability and access to credit 
management  training  and  financial  literacy  (digital  as  well)  for  SMEs. 
Nevertheless,  one  stakeholder  (AT  federal  economic  chamber  of  commerce) 
positioned against it. They fear that it is only a small step from ‘promoting the use 
of digital payment instruments to their mandatory use’ so such measures could have 
a negative impact on SMEs, as they may not yet rely on fully digital systems and 
lead to high technical retrofitting costs’.  

340.  The  European  Observatory  of  payments  was  also  supported  by  the  majority  of 
stakeholders, mostly business association (for example CEPYME and EUF) and 
public authorities (for example from BE and NL). They argue that the collection 
and publication of data on average payment periods and payment performance will 
help to monitor and enhance compliance and to improve the liquidity position of 

85 

 
 
SMEs. However, there are also some (mostly citizens) that oppose, as they argue 
that it would induce additional cost and unnecessary funding. 

3.3.  POLICY OPTION 2: FOSTER TIMELY PAYMENTS 

341.  The  interests  and  the  compensation  are  rarely  paid.  80,3%  (754  out  of  939) 
respondents to the SME Panel stated that the EUR 40 compensation and interests 
are never paid automatically by their clients in case of late payments.  

342.  This  is  confirmed  by  the  results  of  the  PC.  Only  a  minority  of  the  companies 
participating to the consultations (25%, 7 out of 28) claims regularly interests on 
late payment: 7,1% always does it, another 7,1% does it very often and 10,7% does 
it frequently. Normally the interests are rarely (39,3%, 11 out of 28) or even never 
(35,7%,  10  out  of  28)  requested.  The  situation  is  even  worst  for  the  flat  fee 
compensation. Only 10,7% (3 out of 28) claims it frequently while 25% (7 out of 
28) rarely do it and the majority (57,1%, 16 out of 28) never do it. None replied 
to  not  claim 
always  or  very  often.  In  both  cases 
interests/compensation was the fear to lose the customer (mentioned 12 times). 

the  main  reason 

343.  The companies participating to the PC have mixed opinions on the adequacy of the 
interests and the compensation: 28,6% (8 out of 28) think they are adequate while 
32,1% (9) would like to increase both of them to reflect the inflation and/or increase 
their effectiveness as deterrents against late payment delays. Only 14,3% (4) would 
prefer to increase only the compensation and 7,1% (2) only the interests. The large 
majority (60,7% or 17 out of 28) agrees that the interest on late payment and the 
flat  fee  compensation  of  a  minimum  of  EUR  40  per  invoice  should  be  applied 
automatically, as soon as the debtor is late with the payment. Only 17,9% (5) is 
against and another 21,4% (6) don’t know. 

344. 

In  the  public  consultation  67  respondents  out  of  117  (no  differences  between 
business  organisations  and  companies)  agreed  on  the  proposal  that  public 
authorities  should  put  in  place  mechanisms  to  verify  that  main  contractors  are 
complying  with  the  rules  on  prompt  payment  when  paying  subcontractors,  in 
particular when a subcontractor is an SME. 

345.  The large majority of stakeholders participating to the other consultation activities 
supported  the  proposal  to  make  the  payment  of  interests  automatic.  They  were 
mostly businees associations (for example APORMED from PT and the European 
Builders Confederation), companies (especialy SMEs which strongly support this 
proposal)  and  some  public  authorities.  They  support  a  system  of  penalties  (for 
exemple CEPYME), agree on adapting the flat fee compensation and that Member 
States should set up enforcement bodies (for example ES region). Finally they think 
that contracting autorities should ensure that subcontractors in public tenders are 
paid on time. This is supported in particual by some Spanish business organisations 
and  ESBA.  ESBA  proposes  that  ‘it  should  become  a  standard  clause  in  public 
tendered contracts that the company that is awarded the public contract must pay 
their sub-contractors on the same terms that they are to be paid under the contract 
or penalties will apply’.  

86 

 
 
346.  Only few are against these proposals and they are mainly local public authorities 
(for  example  IT  cities)  and  a  couple  of  business  organisation  (example  the  AT 
federal economic chamber) as they think that they could be additional burdens on 
the economy and the creation of monitoring bodies at EU or national level should 
be ‘rejected in view of the already efficient enforcement possibilities of ordinary 
legal remedies or other redress instruments’. 

3.4.  POLICY OPTION 3: BETTER BALANCE BETWEEN LARGE AND SMALL OPERATORS, 

TO ENSURE FAIR PAYMENT CONDITIONS AND EMPOWER SMES 

347.  These proposals are largely supported by the results of the consultation activities. 

348.  84%  (789  out  of  939)  of  the  respondents  to  the  SME  Panel  consider  very 
useful/useful  that  EU  countries  set  up  enforcement  bodies  with  the  power  to 
investigate and receive complaints, and to issue administrative fines for repeated 
bad payment behaviour. 65,2% (612) found very useful/useful that EU countries 
appoint a national ombudsperson for SMEs (or similar body) to bring the issue of 
late  payments  to  political  attention  and  liaise  with  businesses  and  governmental 
bodies.  

349.  According to the SME panel, the mediation was never used to solve disputes on 

late payment by 51,9% (487 out of 939) of the respondents..  

350.  The  SME  Panel  gives  also  an  overview  of  unfair  payment  practices  used  to 
circumvent the agreed payment deadlines. The most used is to modify retroactively 
key  contractual  provisions  (e.g.,  on  price,  quantity  or  quality  of  goods/services, 
delivery times, etc.) in order to postpone the payment as 68,1% of respondents (640 
out of 939) experienced it at least once and only 23,4% (220) never experienced it. 
Other  used  unfair  practices  are  to  deliberately  delay  the  acceptance  of  services 
provided and/or of goods delivered (66,3% of respondent, 622, encountered it at 
least once) and deliberately contest the invoice (58,2%, 547). A less used practice 
is pay with financial products as only 45,4% (426) of respondents incurred in this 
at least once.  

351. 

 92,9%  (26  out  of  28)  of  the  companies  participating  to  the  PC  consider  very 
useful/useful the proposal that prompt payment should be an additional criterion 
when awarding public funding and 89,3% (25) that public procurement procedures 
should include timely payment of suppliers as a criterion. 71,4% (20) consider very 
useful/useful that the European Commission lay down minimum common criteria 
on prompt payment codes.  

352.  All  the  proposals  of  this  option  are  in  general  supported  by  the  stakeholders 
participating  to  the  other  consultation  acitivites,  in  particular  by  business 
associations. They think that Member States should appoint a responsible authority 
to  monitor  compliance  and  intervene  at  the  request  of  small  businesses  or  their 
organisations  and, 
for  non-compliance 
(SMEunited). They also think that prompt payments should be an award criterion 
in public tenders (for example Sinf from SE, CEPYME from ES, CECOP). The 
proposal  to  set-up  a  National  Payment  Envoy  is  also  supported.  The  idea  to 

impose  sanctions 

if  necessary, 

87 

 
 
introduce a national mediation system received positive opinions as it is seen as a 
quick way to solve disputes (ES chambers of commerce) and because ‘alternative 
dispute  resolution  mechanisms  to  solve  payment  disputes  must  be  encouraged’ 
(Eurocommerce).  Finally,  stakeholders  (mostly  SMEs)  provided  examples  of 
unfair payment practices aimed at artificially extending the payment deadline. They 
think that these practices should be discouraged.  

353.  Only  in  a  couple  of  cases  (Confcommercio  from  IT  and  AT  federal  economic 

chamber) negative opions were provided. 

4. 

SECTION 2: FEEDBACK ON THE CALL FOR EVIDENCE 

354.  Stakeholders who provided feedback to the inception impact assessment expressed 
in general support for the revision of the late payment directive. They in general 
agreed with the problem definition and confirmed the need to tackle the identified 
issues. 

355.  They mostly supported the proposal to capping the payments terms at 30 days in 
B2B transactions, in particular the business organisation representing SMEs and 
the companies (again especially SMEs). Only few the stakeholders were against 
the  capping,  in  particular  some  national  business  associations  and  some  public 
administrations.  

356.  The  stakeholders,  mostly  business  associations  and  public  authorities,  also 
supported  the  proposals  to  provide  training  on  credit  management  and  financial 
literacy and to set-up the European Observatory of payment. Only few were against 
these initiatives, mostly citizens and a couple of business associations. 

357.  The large majority of stakeholders, especially bsuiness associations, supported the 
proposal to make the payment of interests automatic and to introduce a system of 
penalties They also agree on adapting the flat fee compensation and that Member 
States  should  set  up  enforcement  bodies.  Finally  they  think  that  contracting 
authorities  should  ensure  that  subcontractors  in  public  tenders  are  paid  on  time. 
Only few, in particular local public authorities, are against these proposals. 

358.  They think, especially business organisations and company (SMEs), that Member 
States  should  appoint  a  responsible  authority  to  monitor  compliance  and  that 
prompt payments should be an award criterion in public tenders. The proposal to 
set-up a National Payment Envoy is also supported. The idea to introduce a national 
mediation  system  received  positive  opinions.  Finally,  they  think  that  unfair 
practices  to  deliberately  extend  the  payments  deadlines  should  be  discouraged. 
Only in a couple of case negative opinions were provided. 

88 

 
 
 
 
 
 
C.  ANNEX 3: WHO IS AFFECTED AND HOW? 

1. 

PRACTICAL IMPLICATIONS OF THE INITIATIVE 

359.  Businesses would, on an aggregate level, be positively affected by this initiative. 
Reduced  payment  times,  estimated  at  35%,  will  liberate  cash  flow  and  provide 
companies with liquidity. Smaller market players will be less likely to be forced 
into unfair payment terms and will have effective means of redress when they are 
paid  late.  Creditors  who  get  paid  on  time  will  have  significantly  reduced 
administrative costs from  chasing  debtors  and trying to  negotiate short  payment 
terms.  

360.  This  initiative  imposes  some  costs  on  businesses.  Most  costs  affecting  all 
businesses are one-off, such as updating standard invoices to reflect new payment 
terms and adjusted compensation fees. Recurring costs are mainly borne by debtors 
that currently pay late. They are liable for increased payment of compensation and 
interest,  potential  administrative  fines,  and  the  loss  of  hassle-free  credit  when 
forced to pay on time. It is important to note that debtors can avoid most of these 
costs by paying on time. 

361.  Beyond purely that this option will contribute monetary weighing up of costs and 
benefits,  it  should  be  underlined  to  fairness  in  business  relations.  This  initiative 
seeks  to  ensure  that  each  party  of  a  commercial  transaction  is  paying  for  the 
liquidity they use. Even if debtors face some costs of late payment, these are mostly 
directly benefitting the creditor, thus contributing to a fairer market distribution. 
Moreover, several non-monetary benefits will accrue to businesses. A reduction in 
late payments will have a positive effect on the well-being of entrepreneurs. 

362.  Public authorities would face some costs to designate and run the enforcement 
and mediation bodies foreseen in this initiative, estimated at EUR 70-105 million 
per year for the EU-27 (EUR 60-65 million for enforcement bodies and EUR 10-
40  million  for  mediation  services).  Moreover,  public  authorities  benefit  from 
mediation systems, both directly (if the public authority wishes to settle a dispute 
with a supplier) and indirectly (through reduced burden on the judicial system). An 
indirect benefit stems from the overall expected reduction in late payments, which 
means  fewer  bankruptcies  and  associated  costs  to  the  public  purse.  Public 
authorities would have to verify all invoices within 30 days and obtain assurance 
that  subcontractors  are  paid  on  time  in  public  works  contracts  falling  under  the 
scope of the public procurement directives. 

363.  Citizens/consumers  are  not  directly  affected  by  this  initiative.  They  may  be 
indirectly  affected  if  the  increased  cash  flow  for  companies  and  increased 
competitiveness lead to better choice and lower prices for consumers but this is not 
a direct focus of this initiative. 

89 

 
 
  
 
2. 

SUMMARY OF COSTS AND BENEFITS 

I. Overview of Benefits (total for all provisions) – Preferred Option 

Amount 

Direct benefits 

Comments 

Capping payment terms reduces the cost to a 
company of negotiating payment terms 
(estimated 33% of companies) and/or being 
forced to accept longer payment terms than they 
are comfortable with. It will also lead to an 
estimated 35% reduction in actual payment 
times when combined with enforcement and 
sanctions, leading to an EUR 8.74 billion cost 
saving on hassle-costs for creditors. The 
evidence also shows that the economic benefits 
exceed the direct cost for debtors, bringing the 
overall cost of financing down and better 
predictability of cash flows. 

Easier access for SMEs to credit management 
and financial literacy training. The value of a 
company’s participation in financial literacy 
training is estimated between EUR 200 and 
EUR 1 800, but the aggregate EU-27 benefit will 
depend on the choices made by Member States’ 
public authorities. 

Increased deterrent to paying late. Reduced costs 
for companies being paid late by avoiding them 
having to negotiate on interest. Direct monetary 
benefits to the creditor that receives interest 
payment estimated at EUR 265.5 million – 
assumptions in Annex 4 - reflecting a direct cost 
to debtors (redistributive effect between 
companies in B2B transactions, transfers from 
public authorities to companies under G2B 
transactions). 

Increased deterrent to paying late. Direct 
monetary benefits to the creditor that receives 
compensation payment estimated at EUR 3.75 
billion, reflecting a direct cost to debtors 
(redistributive effect between companies in B2B 
transactions, transfers from public authorities to 
companies under G2B transactions). 

Businesses that are paid late have an official 
body to turn to and to enforce their claim. Strong 
enforcement is estimated to reduce late payment 
delays by 17.8% (which is accounted for under 
the consolidated 35% reduction referred to in 
line 1 (30-day capping) of this table. 

We conservatively assume that a 35% 
reduction in late payment is realistic by 
consolidating the reductions in payment 
delays of 23.4% from PO1, 17.8% from 
PO2 and 5.5% from PO3. 

The preferred option would lead to an 
overall expected reduction in late payments 
with fewer associated costs to the public 
purse. 

Legally automatic payment of interest 
compensation represents benefits to 
creditors and a cost to debtors if invoices 
are not paid on time. 

Legally automatic payment of 
compensation fees represents benefits to 
creditors and a cost to debtors. 

The administrative fines are estimated at 
EUR 136.8 million per year 

Description 

Capping at 30 days in B2B 
transactions Verification or 
acceptance procedure 
capped at 30 days (no 
derogation) 

MS facilitate availability 
and access of SMEs to 
credit management and 
financial / digital literacy 
training 

Making payment of interests 
legally automatic (eliminate 
the concept of 
‘entitlement’); 

Leave the rate of interests 
for late payment as such 
(ECB+8%) 

Adapt the flat fee 
compensation to reflect past 
inflation (to the level of 
EUR 50), and make its 
payment legally automatic 

MS to designate bodies 
responsible for the 
enforcement of the 
Directive, carrying out 
investigations ex officio , 
acting on complaints, and 
empowered to issue 
administrative sanctions and 
publish the name of 
offenders (‘name and 
shame’)  

90 

 
 
 
 
 
 
 
I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

Public authorities procuring goods or services 
through public work contracts lead by example 
and verify that payment to the main contractor 
has been passed onto the subcontractors. 
Companies working for public work contractors 
on subcontracts (Tier 2 subcontractors) have 
additional guarantees to be paid on time. Prompt 
payments to subcontractors in public works 
contracts could unblock up to EUR 31 million of 
payments a year. 

Reduced hassle and litigation costs on the 
creditor when enforcing the payment and 
associated fees and interests. Avoided court 
cases and relief on the judicial system. Benefit is 
estimated as EUR 27 million in avoided court 
cases and a 5.5% reduction in payment delays 
contributing to the consolidated reduction of 
35%, referred to in line 1 (30-day capping) of 
this table. Public authorities would also benefit, 
both directly and indirectly (see below). 

Indirect benefits 

An indirect benefit stems from the overall 
increased fairness of business relations and 
strengthened sustainable competitiveness, 
achieved thanks to expected 35% reduction in 
late payments, which means fewer bankruptcies, 
lay-offs and associated costs to the public purse. 

Contracting authorities in 
PP ensure that 
subcontractors are paid for 
all public work contracts 

MS to set up a national 
system of mediation  

MS to designate bodies 
responsible for the 
enforcement of the 
Directive, carrying out 
investigations ex officio, 
acting on complaints, and 
empowered to issue 
administrative sanctions and 
publish the name of 
offenders (‘name and 
shame’). 

(direct/indirect) 

Administrative cost savings related to the ‘one in, one out’ approach* 

(1) Estimates are gross values relative to the baseline for the preferred option as a whole (i.e. the impact of 
individual actions/obligations of the preferred option are aggregated together); (2) Please indicate which 
stakeholder group is the main recipient of the benefit in the comment section;(3) For reductions in regulatory 
costs, please describe details as to how the saving arises (e.g. reductions in adjustment costs, administrative 
costs, regulatory charges, enforcement costs, etc.;); (4) Cost savings related to the ’one in, one out’ approach 
are detailed in Tool #58 and #59 of the ‘better regulation’ toolbox. * if relevant 

91 

 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

Adjustment 
cost of updating 
general 
payment terms 
and invoices 
because of 
capping 
payment terms 
in B2B 
transactions at 
30 days: EUR 
56.1 million. 
The amount is 
included in the 
cost of revision 
of standard 
payment terms 
required for 
adapting the 
compensation 
fee to inflation 
(EUR 243 
million) 
representing 
synergies from 
a single 
revision. 

Capping at 
30 days in 
B2B 
transactions 
Verification 
or 
acceptance 
procedure 
capped at 30 
days (no 
derogation) 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Direct 
regulatory fees 
and charges 

Direct 
enforcement 
costs 

Indirect costs 

Negligible cost 
assumed based 
on input from 
public 
authorities into 
the Evaluation 
study 2015. 

Verification of 
purchases 
withing 30 days 
can be covered 
with existing 
resources – no 
additional cost 
under business-
as-usual 
scenario. 

92 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

MS facilitate 
availability 
and access of 
SMEs to 
credit 
management 
and financial 
/ digital 
literacy 
training 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Direct 
regulatory fees 
and charges 

Direct 
enforcement 
costs 

Indirect costs 

Making 
payment of 
interests 
automatic 
(eliminate 
the concept 
of 
‘entitlement’
) and clarify 
dies ad quem 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Direct 
regulatory fees 
and charges 

Possible adverse 
effect on the 
income of 
commercial 
providers of 
financial training. 

Cost to run 
training 
programmes and 
information 
campaigns. 
These costs are 
not quantified 
because they 
will depend on 
choices and 
arrangements 
made by 
Member States. 

93 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

Direct 
enforcement 
costs 

Indirect costs 

Cost on debtors 
who pay late. 
Debtors can 
avoid these costs 
by paying on 
time. Costs of 
automatic 
payment of 
interest 
compensation: 
EUR 228.3 
million.  

These costs for 
B2B are based on 
the 14% / 86% 
allocation keys 
between public 
procurement’s 
and private 
sector’s share of 
GDP. 
These costs for 
business are also 
a benefit for 
business 
(redistributed 
from businesses 
to businesses). 
Assumptions and 
calculation in 
Annex 4. 

Cost on debtors 
who pay late. 
Debtors can 
avoid these costs 
by paying on 
time. Costs of 
automatic 
payment of 
interest 
compensation: 
EUR 37.2 
million.  

These costs for 
G2B are based 
on the 14% / 
86% allocation 
keys between 
public 
procurement’s 
and private 
sector’s share of 
GDP. 
These costs are 
transferred from 
public debtors to 
business 
creditors. 
Assumptions 
and calculation 
in Annex 4. 

94 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

Adjustment of 
invoices and 
terms: EUR 10 
per public 
entity. 

Adjustment of 
invoices and 
terms, the cost 
of updating 
general 
payment 
terms/invoices: 
EUR 243 
million.  

This amount 
includes the 
EUR 56.1 
million cost for 
adaptations of 
standard terms 
doe to the 
introduction of 
the 30-day cap. 

Leave the 
rate of 
interests for 
late payment 
as such 
(ECB+8%) 
but adapt the 
flat fee 
compensatio
n to inflation  

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Direct 
regulatory fees 
and charges 

95 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

Leave the 
rate of 
interests for 
late payment 
as such 
(ECB+8%) 
but adapt the 
flat fee 
compensatio
n to inflation  

Direct 
enforcement 
costs 

MS to 
designate 
bodies 
responsible 
for the 
enforcement 
of the 
Directive, 
carrying out 
investigation

Indirect costs 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Cost on debtors 
who pay late.  

Debtors can 
avoid these costs 
by paying on 
time.  

Costs of 
automatic 
payment of 
compensation 
fees: EUR 3.23 
billion.  

These costs for 
B2B are based on 
the 14% / 86% 
allocation keys 
between public 
procurement’s 
and private 
sector’s share of 
GDP. 
These costs for 
business are also 
a benefit for 
business 
(redistributed 
from businesses 
to businesses). 
Assumptions and 
calculation in 
Annex 4. 

Cost for 
designating the 
enforcement 
body. Estimate 
included in the 
annual 
recurrent cost. 

Cost on debtors 
who pay late. 

Debtors can 
avoid these costs 
by paying on 
time. 

Costs of 
automatic 
payment of 
compensation 
fees: EUR 0.53 
billion.  

These costs for 
G2B are based 
on the 14% / 
86% allocation 
keys between 
public 
procurement’s 
and private 
sector’s share of 
GDP. 
These costs are 
transferred from 
public debtors to 
creditor 
businesses. 
Assumptions 
and calculation 
in Annex 4. 

96 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

s ex officio, 
acting on 
complaints, 
and 
empowered 
to issue 
administrativ
e sanctions 
and publish 
the name of 
offenders 
(‘name and 
shame’)  

Contracting 
authorities in 
PP ensure 
that 
subcontractor
s are paid for 
all public 
work 
contracts 

MS to set up 
a national 
system of 
mediation  

Direct 
regulatory fees 
and charges 

Direct 
enforcement 
costs 

Indirect costs 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Direct 
regulatory fees 
and charges 

Direct 
enforcement 
costs 

Indirect costs 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Direct 
regulatory fees 
and charges 

Cost of 
regulatory fines 
for business 
debtors, 
estimated at 
EUR 136.8 
million (Annex 
4).  

Debtors can 
avoid these costs 
by paying on 
time. 

Contractors to 
disclose payment 
information; 
EUR 2.2 million 
p.a. for EU-27. 

Cost of running 
the enforcement 
body, estimated 
at EUR 60-65 
million p.a. for 
all EU-27. 

Cost to set up 
or designate 
mediation 
system. 

97 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

Direct 
enforcement 
costs 

Indirect costs 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

Direct 
regulatory fees 
and charges 

Direct 
enforcement 
costs 

Indirect costs 

Requirement 
for MS to 
address the 
question of 
unfair 
payment 
terms and 
practices 

Total  

Direct 
adjustment 
costs  

Cost to run 
mediation 
system, 
estimated at 
EUR 10-40 
million p.a.  

Possible adverse 
effect on the 
income of 
commercial 
providers of 
mediation 
services. 

MS would bear 
some cost 
related to 
setting the rules 
and actions on 
unfair payment 
terms and 
practices 

Costs related to the ‘one in, one out’ approach 

EUR 243 
million, related 
to updating 
standard 
payment 
terms/invoices 
to reflect the 
capping at 30 
days and the 
adaptation of 
compensation 
fees. 

98 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumer
s 

Businesses 

Administrations 

One-off  Recurre

One-off 

Recurrent 

One-off 

Recurrent 

nt 

Indirect 
adjustment 
costs 

Administrative 
costs (for 
offsetting) 

Possible adverse 
effect on the 
income of 
commercial 
providers of 
financial / digital 
training and 
mediation 
services. 

EUR 2.2 million 

(1) Estimates  (gross  values)  to  be  provided  with  respect  to  the baseline;  (2)  costs  are  provided  for  each 
identifiable action/obligation of the preferred option otherwise for all retained options when no preferred 
option  is  specified;  (3)  If  relevant  and  available,  please  present  information  on  costs  according  to  the 
standard typology of costs (adjustment costs, administrative costs, regulatory charges, enforcement costs, 
indirect  costs;).  (4)  Administrative  costs  for  offsetting  as  explained  in  Tool  #58  and  #59  of  the  ‘better 
regulation’ toolbox. The total adjustment costs should equal the sum of the adjustment costs presented in the 
upper part of the table (whenever they are quantifiable and/or can be monetised). Measures taken with a 
view to compensate adjustment costs to the greatest extent possible are presented in the section of the impact 
assessment report presenting the preferred option. 

3. 

RELEVANT SUSTAINABLE DEVELOPMENT GOALS 

III. Overview of relevant Sustainable Development Goals – Preferred Option(s) 
Relevant SDG 

Expected progress towards the Goal 

Comments 

SDG8  decent  work  and 
economic growth 

initiative  will  contribute 

This 
to 
economic growth as it will enhance the business 
environment in the Single Market 

indirectly 

SDG3  Ensure  healthy  lives 
and  promote  well-being  for 
all at all ages  

SDG 4 Quality education 

The  initiative  has  the  potential  to  contribute 
directly to the well-being of entrepreneurs. From 
the  stakeholder  consultation  (SME  panel)  it  is 
obvious that late payment (uncertainty of income 
flow and ultimately potential bankruptcy) impacts 
a large % of the respondents. 

The  initiative  will  support  ensuring  equal  access 
for all women and men to credit management and 
financial literacy training. 

job 

creation, 

Target  8.3:  Promote  development-oriented 
policies  that  support  productive  activities, 
decent 
entrepreneurship, 
creativity and innovation, and encourage the 
formalization  and  growth  of  micro-,  small- 
and  medium-sized  enterprises, 
including 
through access to financial services. 

mortality 

Target  3.4:  By  2030,  reduce  by  one  third 
premature 
non- 
communicable  diseases  through  prevention 
and treatment and promote mental health and 
well-being. 

from 

Target 4.3: By 2030, ensure equal access for 
all women and men to affordable and quality 
technical,  vocational  and  tertiary  education, 
including university. 

99 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
III. Overview of relevant Sustainable Development Goals – Preferred Option(s) 
Relevant SDG 

Expected progress towards the Goal 

Comments 

SDG  9  Industry,  innovation 
and infrastructure 

The  initiative  is  planned  to  boost  fairness  by 
increasing  SME  access  to  financial  services, 
including  affordable  credit,  and  their  integration 
into value chains and markets. 

Target: 9.3 Increase the access of small-scale 
industrial and other enterprises, in particular 
in developing countries, to financial services, 
their 
including  affordable  credit,  and 
integration into value chains and markets. 

100 

 
 
 
 
 
 
 
D.  ANNEX 4: ANALYTICAL METHODS 

364.  This Annex explains in detail the methodology underpinning the calculations of the 

impact of the different policy options. 

365.  The calculations are based on a wide variety of sources, including survey data (e.g. 
Intrum,  SAFE),  actual  payment  data  (e.g.  ECB,  D&B),  and  in-depth  thematic 
studies  (e.g.  JRC)  to  maximise  robustness.  Nonetheless,  all  calculations  rely  to 
some  degree  on  estimation  as  to  the  number  of  companies  affected.  Shares  of 
companies reported in surveys, in particular, can be prone to limited sample sizes 
and  a  certain  self-selection  effect.  To  minimise  these  risks,  wherever  possible 
different survey results were compared to each other and the results from the SME 
Panels. 

366.  The total number of companies, including companies per size class, is  based on 
JRC  nowcasts  done  in  the  context  of  the  SME  Performance  Review,  based  on 
Eurostat  Structural  Business  Statistics  2008-2020  and  the  National  Accounts 
Database 2021-2022. 

367.  The economic effects of late payments have been based on a number of economic 
studies. The JRC study ‘Assessing the economic impact of faster payments in B2B 
commercial transactions’131 finds that, on average, reducing late payments yields 
an increase in aggregate cash flow of approximately 3.69 million euro, roughly a 
0.9%  increase,  for  each  day  of  reduction  of  payment  duration.  It  arrives  at  this 
conclusion by studying a large number (1 255 000) of companies and comparing 
those highly exposed to the 2011 LPD with those less exposed to quantify the effect 
the  EU  LPD  had  on  companies.  It  finds  that  aggregate  cash  flow  in  the  set  of 
exposed companies has increased by 66% thanks to the introduction of the LPD 
(EUR 332 million compared to EUR 200 million in the estimation sample). The 
analysis indicates that the effects could potentially be more significant for small 
(10 to 50 employees) sized companies but he effects of payment term reductions 
can be considered general to all sectors and countries but with a larger impact on 
those where payment terms are longer. The 0.9% increase in cash flow per day of 
reduced  payment  ties  is  to  be  taken  as  a  general  average  for  all  company  sizes, 
countries and sectors. 

368. 

In  certain  instances,  particularly  when  estimating  the  costs  and  effectiveness  of 
mediation services or ombudsmen, the impact assessment had to rely on the few 
examples of Member States or non-EU countries which have already set up such 
systems (e.g. the UK, France). On the basis of such individual countries, data on 
costs and benefits was then extrapolated to the EU economy, based on the numbers 
of enterprises. 

131 
01aa75ed71a1/language-en/format-PDF/source-search  

https://op.europa.eu/en/publication-detail/-/publication/fa844000-356a-11ed-9c68-

101 

 
 
 
369.  Extrapolating from only  a few Member States to  the whole EU economy  brings 
some  limitations,  as  it  assumes  similar  payment  situations  and  compliance 
behaviour across the whole EU. The impact assessment recognises these limitations 
and, when extrapolating, avoids giving exact cost numbers and rather gives a range 
of costs to reflect the uncertainties regarding extrapolations. 

370. 

In order to maximise robustness of extrapolations, comparisons to other sources 
have  been  made  wherever  possible.  For  example,  when  assessing  the  cost  of 
enforcement  bodies,  the  estimates  made  by  France  and  Finland  have  been 
extrapolated  to  the  EU  economy  independently  (based  on  the  cost  estimate 
provided by these two Member States and extrapolated taking into account number 
of companies in different Member States), and both extrapolations lead to roughly 
similar results. In other cases, e.g. when assessing the effectiveness of mediation 
services, experiences from the UK have been complemented by results from the 
SME Panel and other surveys to estimate how many SMEs may be affected. 

371.  The Impact Assessment for the 2011 LPD132 estimated that each day of reduction 
in late payment that the Directive delivers, saves European companies EUR 158 
million  in  finance  costs  that  they  would  otherwise  have  incurred.  This  figure  is 
arrived at through estimating a total of 1 864 billion in unpaid turnover (based on 
a survey of companies asking them to estimate their total value of unpaid turnover), 
and assumes that each day of late payments has to be financed through the overdraft 
facilities offered by their financial institution. It assumes the interest rate given by 
the ECB for ‘revolving loans and overdrafts, convenience and extended credit card 
credit’133. As this estimate is based on a large number of assumptions, the results 
need to be interpreted with caution and should only be seen as an indication of the 
order of magnitude of costs related to late payments rather than a precise figure. 

372.  Several  studies  aim  to  estimate  the  relation  between  late  payments  and 
bankruptcies.  Some  studies  have  indicated  that  in  Belgium  and  France,  25%  of 
bankruptcies are linked to late payments134. Similarly, a study by the Banque de 
France  has  indicated  that  late  payments  increase  the  risk  of  bankruptcy  by  25-
40%135. In the construction industry, late payments have been identified as one of 
the main causes of bankruptcy136. While the exact figures vary between studies and 

132 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52009SC0315&from=EN  
133 http://sdw.ecb.europa.eu/reports.do?node=1000002883  
134 
BE: 
https://justice.belgium.be/fr/nouvelles/communiques_de_presse/lutte_contre_le_retard_de_paiement_dans_
les_transactions_0;  FR:  https://www.latribune.fr/economie/france/entreprises-25-des-faillites-sont-liees-a-
des-retards-de-paiement-483579.html 
135 
de-defaillance-des-entreprises 
136 European Construction Sector Observatory, Late Payments in the Construction Sector: Analytical Report, 
2020, 
https://www.fiec.eu/application/files/6616/0259/5873/2020_Analytical_Report_Late_Payment_in_Constru
ction.pdf 

https://publications.banque-france.fr/les-retards-de-paiement-des-clients-impactent-ils-la-probabilite-

102 

 
 
 
the methodology varies between surveys and analyses of balance sheets, the overall 
trend linking late payments to bankruptcies is clear. 

373.  The total number of B2B and G2B invoices has been estimated based on several 
studies. The Study on the evaluation of invoicing rules of Directive 2006/112/EC137 
estimates that about 18.4 billion invoices were issued each year by EU enterprises. 
This figure includes the UK; a corresponding number for the EU-27 was calculated 
by excluding the UK on the basis of its approximate share of GDP of 15%. This 
calculation leads to an estimation of about 15 billion invoices per year. 

374.  This  is  complemented  by  the  2016  ECB  report138  (also  including  the  UK)  E-
invoicing:  bringing  the  payment  process  fully  into  the  digital  age:  In  Europe, 
according to research, the annual invoice volume is estimated to reach 36 billion 
invoices in 2016. Approximately half of this number are invoices to consumers; the 
other half to businesses and the public sector. As above, these figures confirm an 
estimate of about 18 billion invoices in B2B and G2B, and excluding the UK as 
above confirms the estimate of about 15 billion. 

375.  The Study on the evaluation of invoicing rules of Directive 2006/112/EC139 also 
calculates  the  number  of  invoices  per  size  class.  Table  11  below  shows  the 
estimated average volume of invoices per year by size class. These figures, together 
with the JRC figures on total number of companies above, were used to estimate 
the total number of invoices per size class. 

Table 11: Volume of invoices issued and received by EU firms (annual average, 2017) 

376.  Neither EUROSTAT nor the ECB report on payment terms or payment delays so, 
in  order  to  build  the  comparisons  on  actual  payment  duration,  this  Impact 
Assessment replies on external sources. There are several organisations that collect 
consistent  and  regular  information  on  payment  delays  at  European  level: 

on 

the 

invoicing 

evaluation 

137  Study 
of  Directive 
of 
https://op.europa.eu/en/publication-detail/-/publication/486f3631-2db1-11e9-8d04-
01aa75ed71a1/language-en/format-PDF 
138 https://www.ecb.europa.eu/paym/intro/mip-online/2016/html/mip_qr_1_article_4_e-invoicing.en.html 
139  Study 
2019, 
of  Directive 
of 
https://op.europa.eu/en/publication-detail/-/publication/486f3631-2db1-11e9-8d04-
01aa75ed71a1/language-en/format-PDF 

2006/112/EC, 

2006/112/EC, 

evaluation 

invoicing 

2019, 

rules 

rules 

the 

on 

103 

 
 
 
 
Atradius140,  Dun  and  Bradstreet141  and  Intrum142  are  the  most  widely  cited  and 
used.  The  European  Commission’s  SAFE  (Survey  on  the  access  to  finance  of 
enterprises)143 also collects some information on late payments.  

377.  All of them are based on information collected from surveys or extractions of data 
from their customers databases. It is important also to note that most sources refer 
to payment delays as those beyond the agreed terms between parties – irrespective 
of the terms agreed. 

378. 

In as much as it is survey based, a substantial part of the numerical analysis in this 
section and this study is based on the reports of Intrum which is the source that 
unequivocally collects total payment duration. 

1. 

POLICY OPTION 1 

379.  The costs and benefits of capping payment terms at different maximum terms have 

been estimated as follows. 

380.  Current  average  payment  terms  in  B2B  transactions  are  at  39.3  days;  actual 
payment  times  are  52.6  days144.  To  simulate  a  proportionate  reduction  of  actual 
payment  times  to  a  new  maximum  payment  term  of  30  days  (under  PO1a),  the 
simple proportion of 30 divided by 39.3 days has been applied to actual payment 
duration of 52.6 days: 

(30 / 39.3) * 52.6 = 40.2 

381.  To estimate the share of companies specifying payment terms of more than 60 days, 
Intrum’s European Payment Report145 was used. As this report only asks for a band 
of payment terms specified (51-75 days, above 75 days, etc.), a precise estimate of 
how  many  companies  are  specifying  payment  terms  above  60  days  was  not 
possible. We therefore looked at all companies paying in more than 50 days (24%) 
and assumed these companies were equally distributed in the 51-75 band, with 40% 
of  the  24%  specifying  payment  terms  of  51-60  days,  and  60%  of  the  24% 
specifying  payment  terms  above  60  days.  This  assumption  leads  to  a  result  of 
14.4%  of  all  companies  specifying  payment  terms  above  60  days  (impacted  by 

140  Atradius  Payment  Practices  Barometer,  https://atradiuscollections.com/global/reports/payment-
practices-barometer-b2b-payment-practices-trends-western-europe-2022.html, 
and 
https://group.atradius.com/publications/payment-practices-barometer/b2b-payment-practices-trends-
eastern-europe-2022.html 
141 Cribis D&B Payment Study 2022 
142  Intrum,  European  Payment  Report  2022,  https://www.intrum.com/publications/european-payment-
report/ 
143  European  Commission,  Survey  on  the  access  to  finance  of  enterprises,  https://single-market-
economy.ec.europa.eu/access-finance/data-and-surveys-safe_en 
144  Intrum,  European  Payment  Report  2022,  https://www.intrum.com/publications/european-payment-
report/ 

145  Intrum,  European  Payment  Report  2022,  https://www.intrum.com/publications/european-payment-
report/ 

104 

 
 
 
 
PO1b). This assumption is confirmed by the results of the SME Panel, where 14.5% 
of companies responded they specify payment terms of 60 days and above. 

382.  To calculate the share of invoices where the creditor is an SME and impacted by 
PO1c,  the  above-mentioned  figures  on  invoices  per  size  class  and  number  of 
companies per size class were used, leading to the following table: 

Table 12: Calculation of share of invoices where the creditor is an SME and affected by PO1c 

size 
(employees) 

class 

Number of 
companies 

Invoices  issued  per 
company per year 

Total invoices 

Percentage share 

0 - 9 

10 - 49 

50 - 249 

250 + 

Total 

All SMEs 

22 744 173 

1 332 200 

204 786 

43 112 

24 324 271 

24 281 159 

343 

7 801 251 339 

1 783 

8 699 

2 375 312 600 

1 781 433 414 

142 726 

6 153 203 312 

18 111 200 665 

11 957 997 353 

43,07% 

13,12% 

9,84% 

33,97% 

100,00% 

66,03% 

383.  To estimate the reduction in hassle costs, estimates from the study ‘The Domino 
Effect: the impact of late payments’146 were used. The study estimates the average 
number of man days needed by SMEs to chase up late payments. Although it covers 
only few EU countries, among the EU countries present the values range from just 
over 5 days for Germany to nearly 18 days in Spain. For a conservative estimate, 
we used the 5 days for Germany for the calculation and multiplied this figure by 
the total number of enterprises in the EU-27 (24.3 million), arriving at 121.5 million 
person-days currently spent chasing late payments. The reduction of 23.4% in late 
payments as calculated above was proportionally applied to this share of person-
days, leading to an estimate of 28 million man-days saved per year. 

384.  For  estimating  the  share  of  SMEs  currently  negotiating  their  payment  terms, 
information from the SME Panel was used. Two cases were distinguished: 

1)  SMEs that already have payment terms shorter than 30 days (but may have to negotiate 
to achieve them): We multiplied the share of SMEs currently paid within 30 days (44%) 
with the share of those SMEs currently negotiating on a case-by-case basis (35%), and 
assumed  conservatively  that  50%  of  their  negotiation  would  cease  to  be  necessary 
because of the cap in place, i.e. 44% * 35% * 50% = 7.7% of all SMEs. 

146 https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-
Research-Sage.pdf 

105 

 
 
   
 
 
 
 
2)  SMEs that have payment terms above 30 days: 100% of their negotiation would cease. 
This applies to the 56% of SMEs currently paid beyond 30 days and the share of those 
SMEs negotiating on a case-by-case basis (45%), i.e. 25.2% of all SMEs. 

385.  The shares of SMEs negotiating on a case-by-case basis are different in each of the 
cases:  35%  of  those  SMEs  specifying  payment  terms  below  30  days  negotiate, 
whereas 45% of those SMEs specifying terms above 30 days negotiate. 

386.  Taking  these  two  cases  together  leads  to  an  estimate  of  32.9%  of  all  SMEs 

benefitting from reduced negotiation times. 

387.  Companies will continue to be free to negotiate terms below the maximum cap. 
Negotiation times are therefore conservatively estimated to remain the same for the 
companies not specified under the above paragraphs. 

388.  To  estimate  the  one-off  adjustment  costs  for  companies  from  adjusting  their 
standard template, we relied on ECB data for the costs of processing a paper invoice 
and applied this to estimate the cost of adjusting a standard template. We used the 
high end given by the ECB range (EUR 2.50-10.00)147. For each sub-option, we 
multiplied this cost by the number of companies affected (23% in PO1a, 14.4% in 
PO1b, and 66% of 14.4% = 9.5% for PO1c). 

389.  To estimate the cost of proving SME status in PO1c, we relied on the number of 
companies affected (9.5% of 24.3 million = 2.3 million) and multiplied it with the 
6.5  person-hours  estimated  in  the  SME  Definition148  to  reach  a  total  of  14.95 
million person-hours. This was multiplied by the average EU hourly labour cost 
(EUR 25.70)149 to estimate a monetary value. 

390.  To  extrapolate  from  the  Australian  impact  assessment150,  a  $AUD  to  EUR 
exchange rate of 1:0.62 was used, as well as a number of 2.57 million businesses 
active in Australia151 (i.e. 10.6% of the number of EU companies). 

2. 

POLICY OPTION 2 

391.  To  arrive  at  the  value  of  interest  rate  payments,  we  conservatively  assumed  an 
interest rate of 8% and a total value of unpaid turnover of 1 864 billion euros152. 
We applied the 8% interest to this total turnover, assuming a late payment of 13 

147 https://www.ecb.europa.eu/paym/intro/mip-online/2016/html/mip_qr_1_article_4_e-invoicing.en.html 
148 https://ec.europa.eu/transparency/documents-register/detail?ref=SWD(2021)279&lang=en 
149 Average EU-27 rate used under the OIOO approach  
150 https://oia.pmc.gov.au/sites/default/files/posts/2020/05/payment_times_reporting_scheme_ris.pdf  
151  https://www.abs.gov.au/statistics/economy/business-indicators/counts-australian-businesses-including-
entries-and-exits/latest-release 
152  As 
https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52009SC0315&from=EN.  The  value  has  likely  increased  since  then 
due to increased company turnover, but still serves to provide an order of magnitude. 

Impact  Assessment, 

the  2011  LPD 

estimated 

in 

106 

 
 
 
days (average from the Intrum European Payment Report), leading to the following 
calculation: 

1 864 * 109 * 0.08 * (13 / 365) = 5.31 * 109 

392.  To  estimate  the  effect  of  only  an  additional  5%  of  companies  receiving  the 
automatic interest payments, we therefore multiplied the above figure with 0.05 to 
arrive at 265.5 million.  

393.  The corresponding cost of these EUR 265.5 million automatic interest payments is 
divided  between  businesses  and  public  authorities  based  on  allocation  keys, 
reflecting  the  contribution  of  public  procurement  (14%)  and  business  sector 
(remaining 86%) to GDP. 

EUR 37.2 million=EUR 265 million*0.14 – cost in G2B transactions 

EUR 228.3 million=EUR 265 million*0.86 – cost in B2B transactions 

394.  To arrive at the inflation-adjusted value of the EUR 40 flat fee, we based ourselves 
on Eurostat’s annual Harmonised Index of Consumer Prices153, comparing the EU-
27  2022  value  to  the  2011  value  (year  of  adoption  of  the  current  LPD)  and 
multiplying the 40 euros with the inflation rate from 2011-2022: 

40 * (118.82 / 95.69) = 49.67 

395.  This value was rounded up to 50 euros. 

396.  For  the  total  value  of  compensation  fees,  we  assumed  the  above-mentioned  15 
billion invoices and 10% of invoices being paid late154. We multiplied the resulting 
1.5  billion  invoices  with  the  proposed  flat  fee  (40/70/100  euros  or  50  euros, 
respectively) to arrive at 60, 105 and 150 billion or 75 billion, respectively. We 
then calculated 5% of these shares to reflect the conservative assumption that an 
additional 5% of companies would receive the compensation fees. 

1)  PO2a (adjusting flat fee to inflation, i.e. new EUR 50 flat fee): 1.5 * 109 * 50 * 5% = 

3.75 * 109. 

2)  PO2b (EUR 40/70/100 staggered fee): lower end 1.5 * 109 * 40 * 5% = 3 * 109; higher 

end 1.5 * 109 * 100 * 5% = 7.5 * 109. 

397.  The  corresponding  cost  of  these  EUR 3.75  million  automatic  compensation  fee 
payments is divided between businesses and public authorities based on allocation 
keys, reflecting the contribution of public procurement (14%) and business sector 
(remaining 86%) to GDP. 

EUR 0.53 billion = EUR 3.75 billion * 0.14 – cost in G2B transactions 

153 https://ec.europa.eu/eurostat/databrowser/view/prc_hicp_aind/default/table?lang=en  
154 CRIBIS D&B, Payment Study 2022 

107 

 
 
 
EUR 3.22 billion = EUR 3.75 billion * 0.86 – cost in B2B transactions 

398.  For the cost of enforcement bodies, we extrapolated from the two submissions to 
the Call for Evidence by France and Finland, estimating their cost for running a 
late  payment  enforcement  body.  France  estimated  a  yearly  cost  of  EUR  8.41 
million, while Finland estimated a cost of EUR 680 000 per year. 

399.  Extrapolating from either of these figures gives a very similar estimate for the total 
cost to all EU-27 Member States. As France accounts for about 13.3% of all EU 
enterprises, extrapolating the cost given by the French authorities to the whole EU 
gives  a  cost  estimate  of  EUR  63.0  million;  extrapolating  from  Finland,  which 
accounts for 1.0% of all EU enterprises, leads to an EU figure of EUR 65.4 million. 

400.  The potential administrative fines to companies were estimated in the same way, 
extrapolating from France’s submission of EUR 18.2 million fines collected per 
year, to arrive at EUR 136.8 million per year for the EU-27. 

401.  France also estimated the reduction of late payments due to its enforcement body, 
estimating that since introduction of the enforcement body, average payment delays 
have gone down from 13.6 days to 11.2 days155. 

‘Selon les chiffres du rapport de l'année 2017 de l'Observatoire des délais de paiement, 
l'entrée  en  vigueur  de  la  loi  du  17  mars  2014  précitée  et  du  régime  de  sanctions 
administratives en matière de délais de paiement interentreprises, ainsi que la pression de 
contrôle  soutenue  exercée  par  la  DGCCRF  en  la  matière,  ont  entraîné  une  nette 
amélioration  du  délai  de  paiement  moyen.  En  effet,  selon  ces  chiffres,  la  situation  des 
délais  de  paiement  s'est  globalement  améliorée  de  manière  continue  depuis  le  2ème 
trimestre 2015. Entre cette période et le 3ème trimestre 2017, le retard moyen de paiement 
est  passé  de  13,6  jours  à  11,2  jours  toutes  catégories  confondues  (acheteurs  publics  et 
privés), soit un niveau inférieur à la moyenne européenne, établie à 13,1 jours. En outre, 
depuis le 1er trimestre 2015, la part des paiements sans retard est passée de 36,8 % à 43,6 
% et la part des retards supérieurs à quinze jours, de 31,3 % à 26,9 %’. 

402.  For  the  extrapolation  to  the  EU-27  of  the  UK’s  Prompt  Payment  Policy  to 
subcontractors, we based ourselves on the UK government  figures  showing that 
between 2015-2018, GBP 7.5 million in payments were unblocked156. Converting 
this into euros (exchange rate of 1.13) and extrapolating to the EU-27 on the basis 
of number of companies (the UK’s number of enterprises is 9.1% that of the EU-
27) leads to a figure of 93 million, which we divided by three to arrive at a figure 
per year. 

403.  To estimate the number of main contractors in public contracts, we multiplied the 
total number of companies in the construction sector (3.7 million) with the share of 
construction companies in public contracts (18%) to arrive at 666 000 companies. 

155 https://www.senat.fr/questions/base/2018/qSEQ181007212.html  
156 https://www.gov.uk/guidance/prompt-payment-policy 

108 

 
 
 
Of  these,  we  took  the  share  of  companies  that  are  main  contractors  (26%)157  to 
arrive at a final number of 173 000 companies directly affected by having to pay 
their subcontractors on time. 

404.  To estimate the adjustment cost to reflect the update to standard terms to include 
new compensation fees, we assumed the same EUR 10 as in PO1 and applied it to 
all 24.3 million companies. 

3. 

POLICY OPTION 3 

405.  To compare costs and effectiveness  of National  Payment Envoys and a national 
mediation system, we used the examples of the UK’s Office of the Small Business 
Commissioner and France’s Médiateur des entreprises and extrapolating from these 
examples.  The  extrapolation  was  based  on  the  number  of  companies  in  each 
country compared to the EU-27 (13.3% for France, 9.1% for the UK). 

406.  For  the  costs  of  the  UK  Small  Business  Commissioner,  we  used  its  2021-2022 
annual operating grant of £946,298158, converted into euros. For the benefits of this 
office, we based ourselves on the same Annual Report highlighting that ‘As a result 
of our direct intervention, £205,775.80 was paid to small businesses’. 

407.  For the benefits of the French médiateur des entreprises, its annual report for 2021 
was used as well as the number of companies supported in 2020159. To estimate the 
potential savings from  avoiding court action, we based ourselves on the  median 
figure for the court fee to start judicial proceedings in a specific commercial case 
from  the 2021 EU Justice Scoreboard160. This  cost  figure was  multiplied by the 
total number of enterprises potentially supported, as well as with the 70% success 
rate given by the médiateur des entreprises. 

408.  To estimate the cost of a mediation system, the proposition for a pilot project ‘ADR 
Tools  in  B2B  Payment  Disputes’  was  used  as  reference.  In  this  project,  a  pilot 
mediation system for the construction sector in Belgium was proposed. The cost of 
such a pilot for three years is estimated at between 175,650 EUR and 648,150 EUR. 
In  Belgium,  18.5%  of  all  companies  are  active  in  the  construction  sector,  and 
Belgium accounts for 2.9% of all EU companies. Extrapolating from the pilot and 
calculating a final figure per year rather than for three years therefore gives an EU-
wide cost of 10.8 million – 39.8 million EUR. 

4. 

PREFERRED POLICY OPTION 

409.  To calculate the combined reduction of late payments in the Preferred Option, we 
assume some overlap in the benefits of each policy option. A company might be 

157 European Construction Industry Federation 
158https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/11301
82/Office_of_the_Small_Business_Commissioner_Annual_Report_and_Accounts_2021-22.pdf  
159 
2021-et-revient-sur-les-12-ans-daction-au-service-des-acteurs-economiques/  
160 https://op.europa.eu/en/publication-detail/-/publication/b2a115fd-3d1d-11ec-89db-01aa75ed71a1  

https://presse.economie.gouv.fr/15-03-2022-le-mediateur-des-entreprises-publie-le-bilan-dactivite-

109 

 
 
 
induced  independently  to  pay  on  time  by  payment  terms  below  30  days,  or  by 
automatic  compensation,  if  only  one  of  the  measures  was  adopted,  but  will  not 
reduce its payment times twice as much if both measures are adopted. We therefore 
assumed the full effect of the largest reduction (PO1, 23.4%), but only take 50% of 
the two smaller reductions (PO2, 17.8% and PO3, 5.5%), as these would already 
be partially covered under the 23.4%. This leads us to a calculation of 23.4 + 0.5 * 
17.8 + 0.5 * 5.5 = 35.05. 

410.  To  arrive  at  the  monetary  amount  reflecting  a  consolidated  35%  reduction  in 
payment delays, equal to EUR 340.2 million, we follow the same reasoning as for 
the 23.4% reduction described in this Annex under PO1.  

411.  To estimate the reduction in hassle costs, estimates from the study ‘The Domino 
Effect: the impact of late payments’161 were used. The study estimates the average 
number of man days needed by SMEs to chase up late payments. Although it covers 
only few EU countries, among the EU countries present the values range from just 
over 5 days for Germany to nearly 18 days in Spain. For a conservative estimate, 
we used the 5 days for Germany for the calculation and multiplied this figure by 
the total number of enterprises in the EU-27 (24.3 million), arriving at 121.5 million 
man-days  currently  spent  chasing  late  payments.  The  reduction  of  35%  in  late 
payments is calculated as follows: 

5 days * 8 hours * 24 300 000 companies * 0.35 reduction = 340.2 million man-hours 

340.2  million  man-hours  *  EUR 25.70  average  hourly  labour  rate  (OIOO  approach)  = 
EUR 8 743 million 

161 https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-
Research-Sage.pdf 

110 

 
 
 
 
 
 
E.  ANNEX 5: COMPETITIVENESS CHECK  

1. 

OVERVIEW OF IMPACTS ON COMPETITIVENESS  

Dimensions of 
Competitiveness 

Impact of the initiative 
(++ / + / 0 / - / -- / n.a.) 

References to sub-sections of the 
main report or annexes 

Cost and price competitiveness  + 

Sections 6.1.1.2, 6.1.2.2, 6.1.3.2, and 

Capacity to innovate 

International competitiveness  

SME competitiveness 

+ 

0 

+ 

2. 

SYNTHETIC ASSESSMENT  

Sections 6.1.1.2, 6.1.2.2, 6.1.3.2, and 

Sections 6.1.1.2, 6.1.2.2, 6.1.3.2, and 

Annex 15 and Annex 16 

412.  The  effect  of  the  preferred  option  on  price/cost  competitiveness  and  innovation 
competitiveness is expected to be positive. With an increased aggregate cash flow 
in the economy, enterprises have more liquidity to invest in innovation or to pass 
cost reductions to consumers.  

413.  Cost competitiveness is expected to improve. The redistribution of the liquidity in 
the economy is fairer because every business is paying for the liquidity they need 
and use. Financial liquidity goes to the end-user and is neither lent not borrowed 
along the supply chain. Cost of funding goes down, because banks directly fund 
the risks of their clients, which they understand well, rather than indirectly finance 
the unknown risk carried by their clients’ customers. Assuming debtor’s stronger 
bargaining  power  (in  a  relationship  in  which  they  impose  late  payment  on 
creditors),  it  should  be  cheaper  for  debtors  to  borrow  money  than  it  is  for  their 
creditors. Debtors would obtain financing for a market price reflecting their credit 
rating, rather than a hidden, implicit interest rate paid by their creditors and passed 
on to the debtors in the price. Minor adjustment cost for debtors to apply and obtain 
the  right  amount  of  finance  for  their  activities  is  considered  business-as-usual. 
Economy-wide, the cost of funding should go down by the spread between the cost 
of creditors’ and debtors’ financing. Conditions for doing business would be more 
predictable, resulting in a more favourable business environment. 

414.  Capacity to  innovate in a more stable and predictable doing  business  conditions 
would improve. Companies’ long-term business plans would not need to account 
for the risk of late payment, and the associated increased risk of bankruptcy, to the 
extent to which they do now. This would make it possible for companies to better 
plan in the long-term, making investments and innovation easier.  

415.  On  international  competitiveness,  companies  carrying  out  import  or  export 
transactions are bound to face mismatches in the length of payment terms (between 
their accounts payable and receivable). Companies will need to manage the risks 
stemming  from  the  payment  terms  mismatches,  e.g.  by  agreeing  with  their 

111 

 
 
 
416. 

417. 

international partners on the law applicable to the contract, which will define which 
party  is  assuming  those  risks.  It  is  then  left  to  the  party  to  find  an  appropriate 
solution to funding that mismatch. We are assuming that these risks, including the 
risk of not being paid, are addressed under market conditions by providers of trade 
finance (cash-in-advance, letter of credit, documentary collections, open account 
and consignment162). These trade finance solutions limit substantially the impact 
of the introduction of a mandatory cap on payment terms.  

In addition, there is a risk that non-EU companies that are not bound by maximum 
payment terms can undercut EU companies by offering long payment terms in a 
non-EU market. However, the effect of this is also estimated to be further limited. 
Many EU partner countries, such as Canada, the US, Türkiye and the UK already 
impose legislation on late payments as well. Finally, this effect has not really been 
visible within the EU, where some countries such as the Netherlands have imposed 
stricter legislation on payments than others. It is also possible that EU companies 
selling internationally will refuse to claim the interest rates and compensation fees. 
SMEs  in  Türkiye  (52%)  are  those  more  likely  to  find  payment  delays  as  a 
challenge. SMEs in the EU (35%) are more likely than SMEs in the US (29%), 
Canada  (24%)  or  Japan  (8%)  to  say  that  payment  delays  are  among  the  biggest 
problems their enterprise faces163.  

In terms of ‘late payments’, there does not seem to be a relevant trade dimension 
nor a conflict with WTO or international rules as the contracting party, as referred 
to above, should agree in the contract which legislation applies. The intention to 
review  the  LPD  notably  to  introduce  the  proposed  changes  would  therefore  not 
have a significant impact. This analysis is also confirmed pursuant to the scrutiny 
of bilateral FTA agreements that the EU has signed - there are no specific mentions 
to late payments which could have resulted in additional commitments. In fact, the 
LPD states that its provisions can be applied to a commercial transaction between 
the EU and non-EU based buyer/seller. The provisions of the LPD could apply in 
this case and it depends on which agreement was made when setting up the contract 
with regards to which legislation applies to the transaction in case of a dispute – 
national law transposing the LPD or the legislation of the other country.  

418.  The  impact  on  SME  competitiveness  is  positive.  The  initiative  is  expected  to 
benefit  all  market  players,  but  a  more  positive  impact  on  SMEs  than  for  large 
enterprises is expected. Since large enterprises are more likely than SMEs to pay 
late, they are therefore somewhat more likely to bear some costs identified in the 
preferred policy option.  

419.  See Annex 15 and Annex 16 for a detailed analysis of impact on SMEs. 

162 https://www.trade.gov/methods-payment 
163 2020 Eurobarometer survey https://europa.eu/eurobarometer/surveys/detail/2244  

112 

 
 
 
 
 
F.  ANNEX 6:   30 YEARS OF EU ACTION TO COMBAT LATE 

PAYMENTS IN COMMERCIAL TRANSACTIONS  

420.  The issue of payment delays in commercial transactions has been on the agenda of 

the EU for more than 30 years.  

421. 

In  November  1992  the  Commission  produced  a  staff  working  paper  ‘on  the 
problem  of  the  time  taken  to  make  payments  in  commercial  transactions’164.  In 
April  1993,  the  European  Parliament  adopted  a  Resolution  calling  on  the 
Commission to make specific proposals ‘without delay’ to combat the issue of late 
payments in commercial transactions165. Subsequently, in June 1993, the ECOSOC 
adopted an Opinion on the Commission’s staff working paper of 1992, calling on 
the  Commission  to  take  action  at  EU  level166.In  May  1995,  the  Commission 
adopted  a  ‘Recommendation  on  payment  periods  in  commercial  transactions’167 
requesting Member States to take the necessary legal and practical steps’ to ensure 
compliance  to  payment  terms  agreed  in  contracts  and  improve  payment 
performance  of  public  authorities.  The  Recommendation  indicated  the  specific 
actions that Member States should put in place to combat late payments: improve 
transparency  of  payment  periods  in  contractual  relations,  improve  training  and 
access to information for businesses, guarantee appropriate redress procedures for 
businesses,  reduce  the  fiscal  effects  of  late  payments  for  SMEs,  monitoring 
regularly  the  payment  performance  of  public  authorities  at  all  levels,  simplify 
payment  procedures  in  public  works  contracts,  ensure  prompt  payment  to 
subcontractors.  

422. 

423. 

In its Resolution of July 1996168 the European Parliament expressed strong doubts 
about the appropriateness of the non-binding approach (a Recommendation) by the 
Commission and called on the Commission to present a proposal for a Directive 
‘as soon as possible’.  

In its Communication on late payments in commercial transactions of 1997169, the 
Commission  highlighted  that  ‘very  little  or  no  action’  had  been  taken  by  the 
Member  States  in  response  to  its  Recommendation  of  1995,  and  that  payment 
performance had worsened across the EU. The Communication emphasised that 
‘increasingly  long  payment  periods  have  serious  consequences  for  all  European 
firms, in particular SMEs whose cash-flow, profitability and competitiveness are 

164 SEC 1992 2214 of 18.11.1992  
165 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C:1993:150:FULL&from=EN 
166 Point 4.3.2 of the Opinion: “When an imbalance in the relative strength of the parties, resulting from a 
dominant position, leads to unfair practices, consisting mainly of imposing inequitable trading conditions, 
it is up to the Commission to take action on the basis of article 86 of the Treaty” 
 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:51993AC0714&from=EN 
167 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A31995H0198 
168 A4-0161 /96  — Resolution on the Commission Recommendation on payment periods in commercial 
transactions (C(95) 1075-C4-0 198 /95) 
169 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:C1997/216/07&from=EN 

113 

 
 
 
undermined. The competitive position of SMEs as suppliers to large firms can be 
distorted by deliberately long payment delays by large firms.’ 

424.  Against this background, Directive 2000/35/EC was adopted. However, already 6 
years after its adoption, it became evident that the Directive was not achieving its 
objectives. In 2006, a study in 10 Member States indicated that 98% of all economic 
operators experienced late payment. Other surveys pointed out that over 30% of 
turnover was paid late to around 44% of the larger companies. The situation was 
worse  for  smaller  enterprises:  59%  were  paid  late  for  more  than  30%  of  their 
turnover. Also, the impact of the Directive on payments by public authorities was 
not  satisfactory.  Nine  years  after  the  entry  into  force  of  the  Directive,  average 
payment delays by public authorities in Italy had increased from 138 days to 170 
days in one year170. This is the background that led to the adoption of the LPD.  

1. 

IDENTIFICATION OF PROBLEMS WITH THE IMPLEMENTATION OF THE LPD 

425.  Regular exchanges with Member States on the implementation of the LPD have 
taken  place  since  2012,  e.g.  through  the  Late  Payment  Expert  group.  The  SME 
envoys’ network including business associations has continuously monitored the 
functioning  of  the  LPD.  Infringement  procedures  have  provided  in-depth 
knowledge  about  market  players’  unfair  practices  and  contract  clauses  used  to 
circumvent the application of the LPD.  

426.  Over the years 2014 to 2022, the LPD – either as a whole or through focussing on 
specific aspects – has been evaluated in several instances. The extensive evidence 
that has thus been collected, has provided input into this impact assessment.  

427.  The  LPD  was  evaluated  in  2015171  and  several  of  its  aspects  were  assessed  in 

2016172, 2017173, 2018174, 2019175, 2021176 and 2022177. 

428.  These assessments have identified a set of shortcomings, which were grouped as 

follows:  

1)  Regulatory gaps and ambiguous rules: 

a)  Lack of maximum payment terms in B2B transactions. Contrary to payments by 
public  authorities  (G2B),  the  Directive  does  not  fix  a  maximum  payment  term 
between business (B2B), but only a “reference” of 30 days. This has resulted in 
excessively long payment terms, imposed on weaker or smaller economic operators 

170 The data indicated are quoted from the “Impact assessment accompanying the proposal for the recast of 
Directive 2000/35/EC” (SEC 2009 316) 
171 Ex-post evaluation  
172 Commission Report to the EP and the Council  
173 JRC 2021  
174 B2B comparative study 2018 
175 EP Resolution 2019 
176 F4F Opinion 2021 
177 Commission Study 2021, JRC 2022 study 

114 

 
 
 
 
by  larger  companies.  By  setting  up  payment  terms  excessively  or  unfairly  long, 
debtors can easily circumvent the obligation of paying on time. 

b)  No  clear  definition  of  “unfair”  practices  or  clauses.  Several  provisions  of  the 
Directive  make  reference  to  the  concept  of  “grossly  unfair”  (for  example  in  the 
negotiation of payment terms in B2B transactions). However, the Directive does 
not define this concept, making it extremely difficult for a creditor to prove that a 
specific contractual clause or practice is grossly unfair. There are also a number of 
unfair  practices  in  place  which  have  the  ultimate  effect  of  circumventing  the 
Directive’s obligations; for example, practices banning assignments of receivables, 
which hamper factoring as well as other novel and digital forms of payment. 
c)  No clarity concerning flat fee compensation (article 6). Debtors have interpreted 
this requirement as applying to individual “contracts” (which can include multiple 
invoices) rather than to individual invoices. The matter was clarified by the ECJ in 
a recent preliminary ruling (Case-585/20). 

d)  No clarity concerning verification procedures, especially their duration. The rules 
on verification procedures also need to take into consideration the case law in the 
recent ECJ ruling in Case C-585/20.  

e)  Lack of “tools” for monitoring and enforcing compliance. The Directive lacks rules 
that support (i) the monitoring of compliance (for example, collection of data on 
average  payment  periods  or  average  payment  terms  in  both  B2B  and  G2B 
transactions),  (ii)  enforcement  of  the  rules  and  (iii)  transparency  about  payment 
performance. .  

f)  Lack of suitable means of redress. The Directive does not provide small creditors 
with adequate tools to take action against their debtors. In fact, the only measure 
envisaged in the Directive, i.e. legal action, can be too costly and time-consuming, 
and could cause serious damage to business relations between the parties. 

2)  Asymmetry of bargaining power between large and smaller operators. Due to size or 
position in the supply chain, smaller businesses are more vulnerable to the risk of being 
paid late. In fact often smaller companies have imposed on them payment terms that 
are  longer  than  they  are  comfortable  with,  out  of  fear  of  losing  a  contract  or  a 
commercial  partner  (a  fear  factor).  Also,  as  payment  delays  are  passed  down  from 
clients to suppliers, smaller suppliers at the end of supply chains are paid late due to 
this “domino effect”.  

3)  Pervasive  culture  of  bad  payment  because  prompt  payment  is  not  incentivised  or 
rewarded. Delaying payments is an intentional practice, since it is a form of financing 
at zero cost and no administrative hassle. This situation persists in times of economic 
stability and deteriorates in times of economic downturn, when access to financing is 
more  difficult.  Lack  of  effective  synergies  with  other  relevant  policies  (e.g.  public 
procurement,  regional  and  structural  funds)  prevents  public  (and  EU)  money  from 
supporting fair payment in commercial transactions. The Directive lacks rules and tools 
to make prompt payments the “norm” in commercial transactions and to marginalise 
bad  payment  behaviour.  This  requirement  is  particularly  relevant  now,  since  the 
National  Recovery and  Resilience Plans in  the  Member States will be implemented 
primarily through public procurement.  

115 

 
 
 
 
 
116 

 
 
 
 
G.  ANNEX 7:   EU PAYMENT OBSERVATORY  

1. 

BACKGROUND  

429.  Currently,  there  is  a  wide  ‘data  community’,  i.e.  authorities,  associations, 
businesses  and  other  entities  collecting  and  publicly  disseminating  extensive 
information  on  payment  performance.  Some  Member  States  have  put  in  place 
methodologies for measuring the payment performance of their public sector, often 
subsequent  to  infringement  proceedings  opened  by  the  Commission  concerning 
bad  application  of  the  LPD178.  The  information  collected  is  published  regularly 
online.  Furthermore,  France  has  been  monitoring  since  1991  the  payment 
performance of public authorities and businesses, thanks to the Observatoire des 
délais  de  Paiement179.  The  French  Observatoire  is  structured  around  a  wide 
partnership  of  public  authorities  (public  hospitals,  local  authorities,  central 
government),  business  federations,  employers,  SMEs  associations,  sector 
associations. In its over 30 years of existence, the success of the Observatory has 
led to creation of a ‘payment culture’, by keeping a high level of attention on the 
issue of late payment  in the French political  debate, and  establishing  a standing 
platform  of  public  dialogue,  cooperation,  exchange  among  stakeholders  on  late 
payment issues, both in the public and private sectors. 

430.  At  EU  level,  large  private  groups,  specialized  in  corporate  analysis,  credit 
information  or  debt  collection180  collect  and  publish  data  about  payment 
performance  of  businesses  and  public  authorities.  Thanks  to  their  capillary 
presence in the EU (and worldwide), these companies have access to large amount 
of data (e.g. invoices of businesses), and their publications on payment behaviour 
have  become  a  reference  for  the  operators.  At  sector  level,  business  federations 
often collect very useful information on payment performance181. The activity of 
national stakeholder platforms182, and SMEs representatives183 is also very useful. 
While the multiplicity of sources is testimony to the importance of the issue of late 
payments,  it  is  difficult  to  gain  a  comprehensive  and  consistent  overview  of 
developments  at  the  EU  level  from  the  information  currently  available,  due  to 
differences in the indicators, sampling, and methodologies used, as well as in the 
sector and geographic coverage. The EP Resolution 2019 identified that the lack of 
a coherent and systemic monitoring tool at EU level of payment performance has 
hampered  the  effective  application  of  the  LPD.  The  EP  Resolution  2019 
emphasized that ‘the introduction of enhanced transparency concerning payment 

178 Spain: https://www.hacienda.gob.es/es ES/CDI/Paginas/PeriodoMedioPago/PeriodoMedioPago.aspx 
Portugal:   
Italy: 

https://www.dgo.gov.pt/noticias/Paginas/PMP.aspx 
https://www.mef.gov.it/operazione-trasparenza/pagamenti/ind_temp/index.html 
https://www.mef.gov.it/focus/Pagamento-debiti-della-PA-ai-creditori/ 
Belgium: https://bosa.belgium.be/fr/themes/budget-et-comptabilite/la-comptabilite-publique/suivi-des-delais-de-
paiement 
179 https://publications.banque-france.fr/liste-chronologique/rapport-de-lobservatoire-des-delais-de-paiement 
180 For example D&B, Atradius, Intrum, Euler Hermes, Graydon and their subsidiaries in the Member States 
181 For example: Confindustria Dispositivi Medici (Italy): https://www.confindustriadm.it/tempi-di-pagamento/; CGIA 

Mestre: http://www.cgiamestre.com/tag/ritardi-nei-pagamenti/ 

182 For example:E.g.: Plataforma Multisectorial contra la Morosidad (Spain): http://www.pmcm.es/ 
183 CGIA Mestre (Italy) http://www.cgiamestre.com/tag/ritardi-nei-pagamenti/ 

117 

 
 
 
 
behaviour  could  discourage  late  payment  and  …  act  as  an  incentive  for  public 
entities and businesses to improve their payment practices’.  

431.  Against this background, the SME Strategy184 of 2020 stated that ‘the Commission 
will support the implementation of the Late Payment Directive by equipping it with 
strong monitoring and enforcement tools. These could include a virtual observatory 
for  monitoring  payment  delays…’.  The  Updated  Industrial  Strategy  2021  also 
announced  the  extension  of  the  pilot  phase  in  construction185  to  the  other 
ecosystems186.  The  2021  Fit  for  Future  Platform  Opinion  recommended  among 
other actions, strengthening transparency about payment terms. The monitoring of 
public authorities’ and businesses’ payment discipline in the Member States is also 
included in some National Recovery and Resilience Plans. For example, in Spain, 
the  law  ‘Crea  y  Crece’187  is  the  flagship  initiative  for  relaunching  the  business 
environment  under  the  Spanish  National  Recovery  Plan.  This  law  foresees  the 
setting up of a national Observatory of late payments (Observatorio Estadal de la 
Morosidad). 

432.  These  developments  led  to  setting  up  of  the  EU  Payment  Observatory.  This  is 
currently being set up by EISMEA (contracting authority) under the supervision of 
DG GROW, with the assistance of an external Contractor, selected through an open 
public tender. The contract, for a duration of two years, and possibility of renewal 
for other two years, started in January 2023. Overall cost for 4 years: 1,3 MIO EUR. 

2. 

PURPOSE OF THE EU PAYMENT OBSERVATORY 

433.  The  purpose  of  the  EU  Observatory  is  to  address  the  needs  identified  above  by 
pulling together the existing information already available in the public domain, 
and create a central reference point in the EU to monitor payment performance in 
commercial transactions G2B and B2B. This tool, unique in its kind, will benefit 
economic operators, public authorities, businesses organizations, academia, as well 
as  the  Commission  services  (e.g.  Semester  Country  reports,  infringement 
procedures, monitoring the implementation of the LPD).  

3. 

FUNCTIONS OF THE EU PAYMENT OBSERVATORY  

434.  The EU Payment Observatory performs three key functions:  

435.  Function  1:  Data  Collection  and  Validation.  This  function  entails  collecting, 
validating and consolidating data on payment performance from various existing 
sources.  This  function  will  facilitate  monitoring  of  trends  and  developments 
concerning  payments  in  commercial  transactions  B2B  and  G2B.  Data  to  be 
collected,  monitored  and  updated  regularly  include  indicators  such  as  average 
payment period, average payment delay, payment of interests and compensations, 

184 COM (2020) 103 - An SME Strategy for a sustainable and digital Europe 
185 https://single-market-economy.ec.europa.eu/sectors/construction/observatory_en 
186 https://ec.europa.eu/commission/presscorner/detail/en/QANDA_21_1885  
187 https://www.boe.es/diario_boe/txt.php?id=BOE-A-2022-15818  

118 

 
 
 
drivers  of  late  payment,  unfair  payment  practices  or  clauses,  recourse  to  court 
proceedings  or  alternative  dispute  resolution,  the effects  of  economic  shocks  on 
payment discipline and impact on supply chains, etc… Geographic coverage is EU 
27+UK. 

436.  Function  2:  Repository.  This  function  entails  collecting  and  classifying 
documents and information on policy measures, both legal and voluntary, and any 
other relevant initiative, put in place by public authorities or business organisations 
or  other  entities  to  combat  late  payments  in  commercial  transactions  and,  more 
generally, to promote a prompt payment culture in the business environment.  

437.  Function 3: Data Analysis and Dissemination This function entails the analysis 
of data collected and validated under Function 1, the information collected under 
Function 2 and their dissemination through both the publication of analytical and 
thematic reports, newsletters, and the organization of events (Annual conference, 
webinars).  For  the  data  analysis,  the  contract  lays  down  strict  requirements  to 
ensure data accuracy and reliability. In the Data Analysis function, the Contractor 
is  required  to  fill  gaps,  extrapolate  and  interpret  the  data,  aggregate  and 
disaggregate data, carry out economic analysis, provide aggregated indexes 

4. 

INTERACTING WITH THE EU PAYMENT OBSERVATORY. THE WEBSITE.  

438.  Access  to  and  interaction  with  the  Observatory  takes  place  through  a  Website, 
hosted  on  Europa,  that  will  go  live  around  May-June  2023.  The  Website  shall 
consist of different sections that reflect the 3 functions indicated above. With an 
appropriate interactive software (i.e., a ‘database management system’), it shall be 
possible to search the database in order to extract information on a specific theme 
There will be a library section providing access to studies and relevant legislation. 
This is linked to the Repository function of the Observatory. There will be a section 
on  analysis  (with  access  to  the  Annual  Report  and  Thematic  reports)  and 
dissemination  events  (Annual  conference,  webinars,  links  to  previous  events, 
newsletters). This is linked to function 3 of the Observatory, i.e. data analysis and 
dissemination  

5. 

THE GOVERNANCE AND MANAGEMENT FRAMEWORK OF THE EU PAYMENT 
OBSERVATORY  

439.  The Commission (through EISMEA, contracting authority) sets up and manages 
the Observatory, with the support of the Contractor, approves the Annual work Plan 
of  the  Observatory,  sets  up  links  with  other  bodies  (SME  envoys,  LPD  Expert 
Group, etc), chairs the ‘Stakeholder Forum’. 

440.  The  Stakeholders’  Forum  is  the  ‘tool’  channelling  stakeholder  participation  and 
active contribution to the EU Observatory. This Forum plays at the same time an 
advisory and operational support role. It is composed by representatives of the ‘data 
community’ referred to in Section 1 of this annex and provides proposals for the 
Annual  Work  Plan  drafted  by  the  Contractor  and  prior  to  its  approval  by  the 
Commission,  provides  timely  inputs  into  the  Contractor’s  operational  activities, 
such  as  informing  about  new  policy  initiatives,  changes  of  methodology, 

119 

 
 
identification of new indicators, contributes to dissemination activities, such as the 
participation and/or organisation of webinars. 

441.  The  composition  of  the  Forum  (currently  27  members)  includes  representatives 

from the following categories:  

1)  Member States’ authorities responsible for collecting data on payment performance of 
their  public  authorities  and  any  other  relevant  data  on  payment  behaviour  in 
commercial transactions. 

2)  Entities  collecting  data  and  producing  reports  or  other  publications  on  late 
payments/payment  behaviour.  These  include  commercial  entities  active  in  credit 
information,  credit  management  and  debt  collection  markets  (e.g.  Dun&Bradstreet, 
Intrum, Atradius, etc.) as well as their EU-level professional groupings (e.g. FECMA, 
FEBIS, CRIBIS, INFORMA…); 

3)  EU-level  business  associations  representing  the  interests  of  various  types  of 
enterprises/sectors  as  well  as  professional  groupings  involved  in  themes  related  to 
payment behaviour (e.g. SMEunited, Business Europe, Eurocommerce, Eurochambres 
etc…).  

4)  Other  entities  with  confirmed  experience  in  data  collection  and  analysis  of  the  late 

payment phenomenon both in the EU (e.g. academia, civil society entities). 

120 

 
 
 
 
 
H.  ANNEX 8: MEDIATION IN PAYMENT DISPUTES 

442. 

Judicial  redress  is  the  main  method  used  to  address  late  payments  in  business 
relationships. However, judicial procedures are costly, lengthy, and often damage 
the business relationship between the parties. 

443.  Alternative  Dispute  Resolution  (‘hereinafter  ADR’)/  mediation  constitutes  a 
middle ground between the maintenance of cordial commercial relationships and 
the creation of a damaging legal conflict before civil and commercial jurisdictions. 
Therefore, ADR/Mediation can constitute a real option and alternative to judicial 
procedures. Its expected benefits are to ensure there is redress when late payments 
occur between businesses and that such procedures are fast, efficient, cost-effective 
and that the business relationship between the parties is not damaged.  

444.  Recital  34  of  Directive  2011/7/EU  on  combating  late  payments  in  commercial 
transactions188  (the  ‘Directive’)  stipulates  that  ‘in  order  to  facilitate  compliance 
with the provisions of this Directive’, Member States should encourage recourse to 
mediation or other means of ADR, and explicitely quotes Directive 2008/52/EC on 
Mediation in Civil and Commercial matters (the ‘Mediation Directive’)189.  

445. 

In 2019, the European Parliament’s (‘EP’) Resolution190 on the implementation of 
the  Directive  calls  on  the  Member  States,  with  the  support  of  businesses’ 
associations, to set up national and/or regional ‘free and confidential’ mediation 
services  ‘accessible  to  all  companies,  as  an  alternative  to  court  proceedings,  to 
resolve payment disputes and maintain business relations, but also to educate the 
companies about their rights and remedies against late payment. The EP Resolution 
also  calls  for  the  ‘public  funding  of  independent  ombudsmen  responsible  for 
investigating late payment and non-payment disputes, assisting small businesses in 
resolving late payment and non-payment disputes, advising on action in the event 
of payment arrears and recommending solutions, particularly to SMEs’. Finally , 
the EP Resolution calls on the Member States and on the Commission to ensure 
that SMEs have ‘effective access to justice in matters relating to the recovery of 
debts in cross-border transactions’. 

446.  Mediation/ADR is already in place in some Member States and has proven to be 
efficient. For example, the French ‘Mediateur des Entreprises’ helps the parties to 
a dispute finding the solution by themselves. It aims at restoring confidence/trust 
between the parties and create a new culture of payments on time and create a fairer 
business environment. It ensures the agreement achieved by the parties is ‘legally 
and  financially  balanced’  and  it  saves  the  relationship  between  the  parties.  In 

188 Directive 2011/07/EU: https://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:048:0001:0010:en:PDF 
189 Directive 2008/52/EC : https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32008L0052 
190 EP Resolution “Combating Late Payments in commercial transactions” 
https://www.europarl.europa.eu/doceo/document/TA-8-2019-0042_EN.html 

121 

 
 
 
 
 
France, 60% of the parties involved in a dispute with a help of a the Mediateur, 
have continue working together after settling the dispute. The rate of success of the 
‘Mediateur des Entreprises’ is  also  very high,  as around 70% of the agreements 
reached in a mediation are implemented by the parties. Finally, it is a very useful 
tool  for  SMEs,  as  shown  by  the  fact  that  92%  of  the  disputes  are  initiated  by 
SMEs/micro SMEs. The Late Payment Directive, which sets measures to fight late 
payment  and  to  improve  businesses’  competitiveness,  establishes  that  Member 
States shall encourage recourse to mediation or other means of alternative dispute 
resolution,  in  order  to  ensure  compliance  with  the  aforementioned  Directive.191 
Against this background, the Commission is now acting in order to incentivise the 
uptake  of  ADR/mediation  in  this  field,  as  an  alternative  to  judicial  dispute 
settlement. 

447.  A  stakeholder’s  consultation192: on  the  use  of  ADR/Mediation  carried  out  in  the 
context of the Commission’s Study on ‘Building a Responsible Payment Culture 
in  the  EU:  Improving  the  effectiveness  of  the  Late  Payment  Directive 
(2011/7/EU)’193 concluded that ADR solutions are largely considered as the right 
tool  to  remedy  the  impact  of  unfair  payment  practices  because  of  their  shorter 
duration,  better  cost  effectiveness  and  less  harm  to  the  business  relation.  Many 
stakeholders,  in  fact,  consider  ADR/Mediation  as  a  win-win  solution  and  that  it 
should be better promoted to help SMEs solve their payment disputes. 

448. 

In addition, evidence across Member States suggests that ADR instruments are not 
yet  commonly  used  by  SMEs’.194  The  main  barriers  to  the  uptake  of 
ADR/Mediation in B2B payment disputes were also identified: (i) the absence of a 
contractual clause on the use of ADR/Mediation in payment contracts; (ii) the lack 
of awareness of companies on the ADR/Mediation tools available to resolve their 
payment disputes, which are not part of the traditional jurisdictional system; (iii) 
the  absence  of  mandatory  mediation/ADR  prior  to  court  actions  in  national 
legislations. The conclusion is that there is a need to continue raising awareness 

191 

Directive  2011/7/EU  on  combating  late  payment  in  commercial  transactions,  adopted  on  16 

February 2011, recital 34. 
192 
This  included  targeted  interviews  with  stakeholders  active  in  the  ADR/Mediation  sector, 
representatives  of  businesses  and  academics,  a  review  of  the  existing  literature  on  ADR/Mediation  in 
commercial  relationships,  and  a  Targeted  Consultation  aimed  at  ADR/Mediation  professionals.  Milieu 
Consulting conducted a Targeted Consultation (TC) aimed at ADR/Mediation professionals in the European 
Union and in other neighbouring states (the UK) on the use of ADR/Mediation in B2B payment disputes. 
The  targeted  consultation  results  also  suggest  a  strong  effectiveness  of  ADR/Mediation  in  solving  B2B 
payment  disputes.  To  the  question  “What  are  the  most  common  outcomes  of  payment  disputes  using 
ADR/Mediation?”, reaching a solution implemented by the parties was the most common outcome for 72% 
of respondents, while more than 88% reported that the most common outcome included the achievement of 
a solution (with or without knowledge of the implementation of the solution by the parties). 
193 
European  Commission,  Directorate-General  for  Internal  Market,  Industry,  Entrepreneurship  and 
SMEs, Study on building a responsible payment culture in the EU : improving the effectiveness of the Late 
Payment  Directive 
2022, 
https://data.europa.eu/doi/10.2873/34185 
194 Business-to-business transactions: a comparative analysis of legal measures vs. soft-law instruments for 
improving  payment  behaviour  https://publications.europa.eu/en/publication-detail/-/publication/c8b7391b-
9b80-11e8-a408-01aa75ed71a1/language-en/format-PDF/source-103408786 - page 10 

(2011/7/EU),  Publications  Office 

the  European  Union, 

of 

122 

 
 
 
among businesses on the guarantees and benefits of the ADR/Mediation tools in 
comparison to jurisdictional dispute settlement.  

449.  Against  this  background,  the  Commission  launched  a  pilot  project  in  order  to 
incentivise the uptake of ADR in the field of late payments, as an alternative to 
judicial  dispute  settlement.  The  pilot  project  will  entail  (i)  making  available  of 
standard clauses for mediation; (ii) creation of a specialist mediation scheme in the 
construction  sector  that  includes  training  of  mediators;  (iii)  awareness  raising 
activities. 

1)  Preparation and making available of standard contractual clauses to include in the 
contracts, setting up the voluntary contractual commitment to attend mediation 
sessions in payment disputes prior to any jurisdictional dispute resolution: 
a)  Many SMEs face the lack of knowledge to insert clauses on mediation in their 

business contracts.  

b)  The Contractor of the Pilot Project will have to perform a mapping of the current 
existing standard clauses in each EU 27 Member States and draft contractual 
standard clauses for mediation in case of payment disputes. 

2)  The creation of a pilot specialist mediation scheme to address payment disputes in 

commercial transactions in the construction sector, which shall include also specific 
training for mediators: 
a)  Identification of the most relevant best practices on mediation schemes for 
payments disputes and then formulating the appropriate recommendations 
regarding the necessary effort (training, investment, developments) to be put in 
the specialist mediator scheme; development of a code of good conduct to be used 
as a guide and a harmonising tool for the work of all mediators active in the 
construction sector.  

b)  Development of a specialist mediation scheme on payment disputes in the 

construction sector in at least one Members State; including a training scheme for 
selecting and training at least 15 specialist mediators on payment disputes in the 
construction sector in the chosen Member State/States. Also ensure that the 
mediators actually deliver mediation sessions to help SMEs solve their payment 
disputes.  

3)  Awareness raising activities and development of a project webpage: 

a)  Ensure there widespread, reliable information regarding the benefits and use of 

ADR/mediation, and how to access mediation when the need arises.  

b)  Organising activities of promotion and awareness-raising (including workshops 

and conferences) 

c)  Creating and maintaining content for a dedicated web section, containing all 

necessary information on the advantages and disadvantages of alternative dispute 
resolution and providing a tool to find a suitable (and specialised) mediator in 
construction sector. The web section is thought to be an effective one-stop shop 
for information, including some standard contractual clauses. 

123 

 
 
450.  The ultimate objective of the Pilot Project is to develop a mediation scheme for 
payment  disputes  in  construction  sector  that  can  be  easily  replicated,  mutatis 
mutandis, in other Member states and other sectors. The project will last for 2 years. 

124 

 
 
I.  ANNEX 9: BEST PRACTICES IN ENFORCEMENT OF PROMPT 

PAYMENT RULES  

1. 

FRANCE : THE ACTIVITY OF THE DGCCRF  

451.  DGCCRF  (Direction  générale  de  la  concurrence,  de  la  consommation  et  de  la 
répression  des  fraudes  of  the  French  Ministry  of  the  Economy)  is,  among  other 
competences,  responsible  for  monitoring  compliance  with  the  rules  of  the 
Commercial Code relating  to  payment terms195. Article L. 441-10 of the French 
Commercial Code provides for the sanction of non-compliance with the legal rules 
relating to payment deadlines by an administrative fine of a maximum amount of 
75,000EUR for a natural person and 2 million EUR for a legal person. This sanction 
is published on line (‘name-and-shame’)196. Unfair practices or clauses having the 
effect of unduly delaying the starting point of payment deadlines (‘délais cachés’) 
are also punished with the same sanctions. The amount of the fine is doubled in the 
event of repetition of the breach within two years from the date on which the first 
sanction decision became final. 

452.  The following are examples of sanctions published by DG CCRF between January-

March 2023. 

195 DGCCCRF is also in charge of (a) detecting anticompetition and unfair practices and agreements, (b) 
ensuring correct behaviour of contracting authorities in public procurement, (c) consumer protection (safety 
and economic interests) 
196 https://www.economie.gouv.fr/dgccrf/sanctions-delais-
paiement#:~:text=L'article%20L.,euros%20pour%20une%20personne%20morale. 

125 

 
 
 
 
 
453.  Since  the  entry  into  force  of  Law  No.  2015-990  of  August  6,  2015  for  growth, 
activity and equal economic opportunities, DGCCRF agents have been competent 
to control and sanction public companies that do not respect the maximum payment 
period  set  in  Articles  R.  2192-11  et  seq.  and  R.  3133-11  et  seq.  of  the  Public 
Procurement Code (i.e. 60 days from the date of receipt of the request for payment 
by the public company). The amount of the maximum fine is currently 2 million 
EUR  for  legal  persons197  The  DGCCRF  relies  on  a  capillary  organisation 
throughout the national territory, including the French Oversea departments, thanks 
to  the  departmental  directorates  (DREETS,  DREETS-Outremer,  DDETS-PP  or 
DDPP)198.  

197 Loi n° 2016-1691 du 9 décembre 2016 relative à la transparence, à la lutte contre la corruption et à la 
modernisation de la vie économique  
198 https://www.economie.gouv.fr/dgccrf/coordonnees-des-DREETS-DRIEETS 
https://www.economie.gouv.fr/dgccrf/coordonnees-des-DDPP-et-DDETSPP 
https://hauts-de-france.dreets.gouv.fr/Controle-des-delais-de-paiement-interprofessionnels-dans-les-Hauts-
de-France 

126 

 
 
 
 
Source: DGCCRF: Repères: Les contrôles de la DGCCRF 

454. 

Investigations  are  initiated  either  on  the  basis  of  complaints,  or  ex  officio.  The 
powers  of  investigation  of  the  DGCCRF  and  its  departmental  ramifications,  are 
laid  down  in  the  law.199,  and  can  be  grouped  in  two  main  categories:  ordinary 
powers  (e.g.  obtain  documents,  copies  of  contracts  and  invoices;  ‘mystery 
shopping’)  and  powers  granted  ad  hoc  by  a  Court  order  (e.g.  search  of  the 
enterprise’s  premises).  Corrective  and  remedial  measures  are  grouped  in  three 
categories:  1)  ‘Educational’,  in  case  of  low-severity  breaches  or  offences, 
consisting,  in  general,  of  a  written  warning  to  the  enterprise.  2)  ‘Corrective’ 
consisting in a formal injunction addressed to the enterprise requesting the adoption 
and  implementation,  within  an  identified  deadline,  of  measures  to  correct  the 
identified breach. 3) ‘Sanctions’ in case of more serious degree of offences.  

455. 

Investigations and sanctions are only one part of the mission of DGCCRF. It should 
also be emphasised the extensive educational/preventive work carried out to inform 
and provide guidance to businesses to ensure correct compliance with the rules.  

199 https://www.economie.gouv.fr/files/2021-05/controles-dgccrf-pouvoirs-enquete-sanction_0.pdf 
https://www.berton-associes.fr/blog/droit-des-affaires/controles-de-la-repression-des-fraudes-dgccrf/ 

127 

 
 
 
 
456. 

In 2021, the DGCCRF inspected 1.272 establishments as part of its investigations 
into the compliance with payment terms, out of which 17 public companies and 
610  companies  having  benefited  from  a  loan  guaranteed  by  the  State  (PGE). 
Measures adopted were distributed as follows: 48% warnings, 7% in injunctions, 
45% sanctions200.  

457. 

In  2022,  the  operational  costs  of  the  branch  of  the  DGCCRF  dedicated  to  the 
control  of  compliance  with  prompt  payment  rules  in  B2B  transactions  were 
EUR 8.41  million.  Administrative  sanctions  collected  for  late  payment  in  2022: 
EUR 18.2 million201 

2. 

SPAIN:  PENALTY  REGIME  FOR  LATE  PAYMENT  IN  THE  ROAD  HAULAGE 
SECTOR 

458. 

In October 2021, Spain adopted a law on the reorganization of the road haulage 
sector, including specific measures to combat late payment 202 

459.  The  explanatory  memorandum  of  the  law  indicates  that  the  fight  against  late 
payment  in  the  field  of  transport  is  a  priority  ‘in  the  policies  of  the  European 
Union’. It recognizes that the different reforms carried out in this area have been 
insufficient or ineffective, in such a way that the average payment period in the 
sector is 90 days, which causes serious damage to a highly fragmented sector  

460.  The  purpose  of  the  reform  is  to  penalize  non-compliance  with  the  maximum 
payment term of 60 days in B2B transactions, as laid down in the Spanish national 
law  transposing  the  LPD203:  According  to  the  road  haulage  law,  the  ‘default’ 
payment term is 30 days, i.e. this is the payment term that applies if no specific 
agreement  on  the  payment  term  has  been  made  in  the  contract.  Payment  terms 
longer than 30 days have to be explicitly agreed in writing. Payment terms of more 
than 60 days are prohibited. The law applies to all road haulage contracts, except 
those in which the debtor is a consumer and the value of the contract is below EUR 
3 000.  

461. 

In case of non-compliance the law lays down a detailed scale of sanctions that vary 
according to the amount owed (see box below). Additional penalties are issued in 
case of reiteration of the offense or in case of extremely long delays, such as the 
impounding  of  the  vehicle  until  the  payment  of  the  corresponding  pecuniary 
sanction is made. 

€401 to €600 penalty when the price of transport is less than €1,000. 

200 https://www.economie.gouv.fr/files/2022-07/ra-dgccrf-21-digital.pdf?v=1669741133 
201 Information provided by DGCCRF to the Commission services via the Late Payment Expert Group.  
202 Ley 13/2021 de Ordenación de los Transportes Terrestres, https://www.boe.es/buscar/act.php?id=BOE-
A-2021-16029 
203  Law  3/2004  por  la  que  se  establecen  medidas  de  lucha  contra  la  morosidad  en  las  operaciones 
comerciales. https://www.boe.es/eli/es/l/2004/12/29/3/con 

128 

 
 
 
 
€601 to €800 penalty when the price of transport is between €1,000 and €1,500 

€801 to €1,000 penalty when the transport price is between €1,501 and €3,000 

€1001 to €2,000 penalty when the price of transport is between €3,001 and €4,000 

€2001 to €4,000 penalty when the transport price is between €4,001 and €6,000 

€4001 to €6,000 penalty when the price of transport is greater than €6,000. 

€6001 to €18,000 penalty for repeat offenders. 

Up to a €30,000 penalty in cases in which the legal payment term is exceeded by more than 

120 days, or when non-payment is considered to significantly affect the economic capacity 

of the aggravated company 

462.  The  law  foresees  that  companies  that  have  been  found  as  non-compliant  and 
sanctioned  shall  be  reported  on  line  (‘name  and  shame’)  in  the  website  of  the 
Ministry of Transport. In 2022, the ministry launched the anonymous complaints 
mailbox service to report possible infringements or non-compliance and thus help 
make the inspection more agile and effective204. 

204 https://www.mitma.gob.es/el-ministerio/sala-de-prensa/noticias/jue-01122022-0944 

129 

 
 
 
 
 
 
 
 
J.  ANNEX 10: INDICATIVE LIST OF EXAMPLES OF UNFAIR 

PAYMENT PRACTICES  

463.  The  LPD  (Recital  28)  states  that  the  abuse  of  freedom  of  contract  to  the 
disadvantage of the creditor, to the sole purpose of increasing the debtors’ liquidity, 
should be prohibited, as it is grossly unfair to the creditor.  

464.  Unfair  payment  practices  or  provisions  are  nonetheless  very  common  in 
commercial partnerships where the number of alternative buyers is much smaller 
than the number of alternative suppliers. This situation makes it easy for buyers to 
dictate  terms  and  make  take-it-or-leave-it  offers.  This  also  explains  why  small 
businesses are reluctant to use the LPD’s remedies as a way to obtain redress or 
prevent  unfair  contractual  behaviour.  It  also  explains  the  so  called  ‘fear  factor’, 
often reported by small suppliers, who are reluctant to take steps to tackle unfair 
behaviour, or even claim interests and compensations when they are paid late.  

1. 

UNFAIR PAYMENT PRACTICES IN THE CONSTRUCTION SECTOR 205 

465.  The EU  construction sector epitomises under many extents  how unfair payment 
practices  spread  along  supply  chains  and  affect  SMEs.  Tier  1  contractors  (large 
contractors,  clients  of  large  public  works  contracts)  often  exert  considerable 
commercial pressure on subcontractors (Tier 2) to agree longer payment terms in 
order to boost their cash flow. On the contrary, Tier 2 and Tier 3 subcontractors are 
often reluctant to challenge current unfair payment practices, because of clients-
contractor relationships and fear of being dropout from the supply chain. 

466.  Generically,  contractual  payments  procedures  allow  for  weekly  or  monthly 
remittance of money to supply chain; but distribution of payments to subcontractors 
Tier 1 to  Tier 2  contractors are often lopsided. The cascade payment method in 
construction  also  known  as  hierarchical  contractual  framework  gives  Tier  1 
contractor dominant bargaining position over subcontractors’ payment. Yet, it is a 
common practice to see subcontractors that carryout over 74% of major work, wait 
for 60 days to receive payments due to commercial influence of Tier 1 contractors 
and unfair payment practices. 

205  Swai,  L.,  Arewa,  A.  and  Ugulu,  R.  A.  2020.  Unfair  Payment  Issues  in  Construction:  Re-thinking 
Alternative Payment Method for Tier-1 Contractors to Subcontractors. International Conference on Civil 
Infrastructure and Construction (CIC2020). 

130 

 
 
 
2. 

MOST COMMON UNFAIR PRACTICES BOTH IN G2B AND B2B TRANSACTIONS 

467. 

Identifying  unfair  payment  practices  and  clauses  is  not  an  easy  task.  The 
overwhelming majority of SMEs are extremely reluctant to report these clauses and 
practices  even  to  the  business  associations  that  are  supposed  to  represent  and 
protect  them,  under  Article  7  (5)  of  the  LPD,  out  of  fear  of  losing  clients  and 
businesses opportunities. Those SMEs who report, prefer to stay anonymous206.  

468.  The  following  list  has  been  drawn  on  the  basis  of  existing  literature207, 
contributions from business associations208, practices identified by the Commission 
in the course of infringement procedures, and anecdotal evidence provided to the 
Commissions  services  by  SME  stakeholders.  This  list,  far  from  capturing  the 
overall extent of existing unfair practices and clauses, provides however an insight 
into how these practices work: 

1)  Contingent  clauses:  i.e. the debtor makes the payment to  the  creditor contingent  on 
future events  that do not depend  on the creditor.  Typical  examples are  ‘Paid-when-
paid’ or ‘Paid-if-paid’ clauses, or similar clauses consisting in making payment to the 
creditor conditional to payment received by the debtor.  

206 Information provided to the Commission services by SME United and national business associations in 
the  Member  States:  UNIZO  (Belgium),  PIMEC  (Spain),  Plataforma  Multisectorial  contra  la  Morosidad 
(Spain), ANCE (Italy)  
207 https://www.law.kuleuven.be/personal/mstorme/european-private-law_en.pdf,  
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/436040/b
is-15-248-challenging-grossly-unfair-payment-terms-and-practices-summary-of-responses.pdf 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/745639/c
reating-a-responsible-payment-culture-call-for-evidence.pdf 
https://www.economie.gouv.fr/files/directions_services/cepc/etude0902051.pdf 
https://www.lexpress.fr/entrepreneurs/gestion-fiscalite/retard-de-paiement-les-faux-pretextes-et-comment-
s-en-proteger_1518967.html 
https://www.keglerbrown.com/content/uploads/2019/10/Contingent-Payment-Clauses-in-the-50-States-
2020.pdf 
Omotayo, TS and Danvers-Watson, O and Oyegoke, AS, 2022 Subcontractor trust issues on payment and 
valuation practices in UK private projects. Journal of Financial Management of Property and Construction.  
208 EBC (European Builders’ Confederation) - Call for Evidence Feedback: F3389200 

131 

 
 
 
 
2)  Delisting,  ‘De-shelving’  or  removal  from  clients’  list  of  suppliers,  or  other 
unfavourable  marketing  consequences  if  suppliers  does  not  accept  payment  terms 
imposed by the debtor.  

3)  Abuse of the verification procedure to avoid or delay payments.  

(1) Negotiate the date of reception of goods or the provision of services , or of 
the  beginning  or  the  end  of  the  verification  procedure  to  ascertain  their 
conformity,  to  the  detriment  of  the  creditor  with  the  ultimate  result  of 
extending the payment period 

(2) Clauses  whereby  the  debtor  is  the  sole  arbiter  of  whether  the  required 
quality has been achieved; allowing for arbitrary deductions from the value 
of work performed or goods provided. Similarly: Disparaging without any 
evidence  the  quality  of  the  good  or  of  the  services  provided  to  delay 
payment 

4)  Altering  dates:  Debtor  requiring  the  creditor  to  postpone  the  date  of  the  invoice  or 
request of payment , despite the fact that the verification was completed and successful 
209 

5)  Unilateral change of payment terms by the debtor, to the detriment of the creditor, often 

with little or no notice. 

6)  Unilateral Discounting: Debtor applying unilaterally (or requesting) discounts on the 
principal  as  a  condition  for  paying  within  the  agreed  deadline  (‘early  bird’  clause). 
Similarly, discounts requested or applied unilaterally by the debtor as a condition to 
pay,  after  the  payment  has  become  overdue  (e.g.:  ‘haircut  clauses’,  ‘clawback 
clauses’).  

7)  Ban on assignments of the credit (e.g. factoring), once the service or good has been 

delivered or performed, and the debtor has accepted it 

8)  In  G2B  transactions:  Ban  on  execution  of  executive  order  of  payments  issued  by  a 

Court 

9)  Payment of excessive fees to cash payment under supply chain finance schemes210; 

in  payments  B2B 

209 The LPD explicitly prohibits this practice in G2B transactions (Article 4(3) (b) of the LPD). Nevertheless, 
despite the prohibition, this practice is quite common – see ANCE : Osservatorio Congiunturale pagamenti 
della PA, 2018 
210  The  practice  of  “confirming  con  anticipo  obligatorio” 
in  Spain 
http://www.pmcm.es/blog/post/pmcm-denuncia-nueva-modalidad-de-confirming-anticipo-obligatorio-que-
elude-las-obligaciones-de-pago-a-proveedores 
https://pmcm.es/la-pmcm-constata-un-abuso-del-confirming-por-parte-de-las-companias-espanolas/ 
In these cases, a financial institution (e.g. a bank, instructed by the debtor) is in charge of managing and 
paying  the  invoices  of  the  debtor.  However,  the  creditor,  in  order  to  claim  its  payment  to  the  financial 
institution within the deadline agreed with the debtor, has to pay excessive  fees or discounts. These fees 
diminish progressively in time: the later the creditor claims its payment, the lesser the fees or discounts to be 
paid.  The  effect  of  this  practice  is  negative  under  two  points  of  view:  1)  Payment  periods  are  extended 
inordinately ( see Call for Evidence, Feedback reference: F3386750) - A payment negotiated at 60 days in 
reality is paid after 120 or even 240 days ( 4 times more the agreed payment term). 2) In the accounts of the 
debtor,  the  invoice  appears  as  having  been  paid  the  moment  the  “confirming”  or  the  instruction  to  the 
financial institution has been made. In this way the debt is not detected in any statistics or calculation of 

132 

 
 
 
 
10) Unnecessary  procedures:  Imposing  artificially  long  or  convoluted  administrative 

requirements in order to get paid, or for issuing and accepting the invoice211 

11) Waiving rights as a condition to get paid: Creditors imposed to waive their rights to 
claim interests and compensations as a condition to get paid, often in conjunction with 
non-recourse clauses. 

469.  Member  States  could  improve  the  business  environment  by  addressing  late 
payment  practices212  through  voluntary/soft  law  measures  such  as:  1)  rewarding 
prompt  payment  in  public  procurement,  granting  support,  or  administering  EU 
funds in line with the applicable rules 213 214; 2) laying down an EU code of good 
payment behaviour to support national payment codes215. 

average payment periods, or reporting. Furthermore, in the debtor’s balance, these operations are not even 
considered as “financial debt”.  
211 Public authorities often proceed with abusive rejections of payments if there is any difference between 
the amount requested by the contractor and the amount initially accepted, which obliges the enterprise to 
issue a new invoice with a new payment deadline, thus artificially prolonging the overall payment time. This 
situation is unfortunately very common, where a problem with the rounding of a few cents or euros results 
in the rejection of the invoice, which leads the company to issue a new invoice with a new payment deadline. 
(EBC- Call for Evidence) 
212 EP Resolution 2019 
213 93% of respondents in the SME panel agreed that prompt payment should be included as a criterion for 
obtaining financial support. The Spanish law Crea y Crece already includes such requirement.  
214  Almost  90%  of  respondents  in  the  SME  panel  agreed  that  prompt  payment  performance  should  be 
included as a criterion for participating in public procurement tenders.  
215 Almost 72% of respondents in the SME panel agreed that this measure is very useful/useful 

133 

 
 
 
 
 
 
K.  ANNEX 11: RELEVANT CASE LAW OF THE ECJ  

470.  The  case  law  of  the  Court  of  Justice  concerning  the  LPD,  either  exclusively  or 
jointly with Directive 2000/35/EC, includes several preliminary rulings216 and one 
judgement in the framework of an ongoing infringement procedure. It should be 
emphasised that most of the preliminary rulings concern the application of interests 
and the ‘flat fee’ compensation for recovery costs of at least EUR 40.  

471.  For  the  purposes  of  this  Impact  Assessment,  the  following  case-law  of  the  ECJ 

deserves a special attention: 

1. 

PRELIMINARY RULING IN CASE C-585/20217 PRONOUNCED ON 20 OCTOBER 
2022 

472.  This  ruling  touches  upon  three  key  issues:  the  application  of  the  flat  fee 
compensation of EUR 40 minimum per invoice or per contract (or judicial claim), 
the use of the verification procedure in public procurement contracts, and whether 
VAT  should  also  be  included  for  the  calculation  of  the  late  payment  interests, 
regardless of whether VAT has already been paid to the State. On these three points, 
the ECJ provided the following interpretation:  

1)  Article 6 (1) of the LPD should be interpreted that the flat fee compensation of EUR 40 
or equivalent is due for ‘each commercial transaction not remunerated on the due date, 
evidenced  in  an  invoice,  including  when  this  invoice  is  presented,  among  other 
invoices, in a single administrative or judicial complaint’  

2)  Article .4(3) of the LPD should be interpreted as it opposes a national regulation laying 
down  a  general  procedure  for  verification  or  acceptance  of  the  goods  or  services 
provided  with  the  contract’s  requirement  for  all  commercial  transactions  between 
companies and public authorities,  

3)  Article  2(8)  of  the  LPD  should  be  interpreted  that  ‘amount  due’  referred  to  in  that 
provision shall also include VAT for the basis of the calculation of the late payment 
interests, regardless of whether, ‘on the date on which the delay payment occurs, the 
taxable person has already paid this amount to the Treasury’  

2. 

JUDGEMENT IN CASE C-122/18218 PRONOUNCED ON 28 JANUARY 2020 

473. 

In Case C-122/18, the Court clarified that paying on time is an ‘obligation of result’, 
not an ‘obligation of means’. More specifically the obligation to pay on time, i.e. 
within the statutory deadline, has to be ‘effectively’ and proactively pursued by the 
authorities.  According  to  the  Italian  authorities,  defendants  in  the  case,  the 
obligation imposed by Article 4(3) and (4) of the LPD ‘puts the public authorities 

216 C 701/22, C677/22, C 419/22, C-406/21, C-370/21, C-585/20, C-327/20, C-299/19, C-199/19, C-722/18, 
C-131/18, C-328/17, C-287/17, C-330/16, C-324/16, C-256/15, C-555/14, C-104/14 
217 BFF Finance Iberia SAU vs Gerencia Regional de Salud de la Junta de Castilla y León, 
218 Commission vs Repubblica Italiana  

134 

 
 
 
not under obligations to achieve a specified result, but at most under obligations as 
to the means employed’. The ECJ thoroughly rejected this argument. According to 
the ECJ, in fact, ‘it cannot be accepted’ the interpretation of the Italian Republic, 
according to which Articles 4(3) and (4) of the LPD ‘impose on Member States 
only  the  obligation  to  ensure  that  the  statutory  and  contractual  payment  periods 
applicable  to  commercial  transactions  involving  public  authorities  are  in 
conformity with those provisions and to provide, in the event of non-compliance 
...for the right of a creditor... to obtain statutory interest for late payment but does 
not impose the obligation to ensure that those public authorities effectively comply 
with those periods’. 

3. 

PRELIMINARY  RULING 
DECEMBER 2016 

IN  CASE  C-256/15219,  PRONOUNCED  ON  15 

474. 

475. 

In this case, that concerned the interpretation of Directive 2000/35/EC, the Court 
noted that the Directive does not harmonise all aspects relating to interest for late 
payment.  In Article 3,  it regulates  only  some  aspects,  namely the entitlement to 
interest in the event of late payment, the date from which the interest is due (dies a 
quo), the rate of interest, the creditor’s right to seek compensation for the recovery 
costs incurred through late payment, and the consequences of the use of contractual 
terms that are grossly unfair to the creditor. 

In  particular,  the  Court  highlighted  that  Directive  2000/35/EU  does  not  include 
rules relating to the period during which interest for late payment runs or to the 
maximum amount of interest (dies ad quem). On this basis the Court declared that 
Directive  2000/35/EU  must  be  interpreted  as  not  precluding  national  provisions 
whereby  interest  for  late  payment  accrued  but  not  paid  ceases  to  run  when  the 
amount of the interest equals the principal amount (ne ultra alterum tantum220) 

219 Drago Nemec v Republika Slovenija 
220 This principle is present in some national civil or commercial codes, for example in Slovenia: Article 
376 of the Obligacijski zakonik , or in Austria: § 1335 ABGB.  

135 

 
 
 
 
 
 
L.  ANNEX 12:  CREDIT MANAGEMENT AND FINANCIAL 

LITERACY  

476.  Credit  management  is  a  complex  activity,  requiring  a  diversified  set  of  skills  in 
various areas, including: (i) an excellent understanding of the role of trade credit in 
promoting sales, coupled with a strong customer orientation and also digital skills 
in a more complex digitalised environment; (ii) an equally excellent understanding 
of  financial  constraints  and  key  financial  parameters;  (iii)  teamwork  spirit  and 
diplomatic  abilities,  in  order  to  be  able  to  reconcile  the  opposite  views  of  the 
marketing/sales  department  (naturally  interested  in  ‘pushing’  sales)  and  of  the 
accounting/financial department (whose prime concern is ‘financial stability’); and 
(iv) an ability to think in terms of general strategy while at the same time mastering 
the  details  of  specific  transactions.  While  experience  plays  an  important  role,  a 
solid background is essential, and this requires specialized training.  

1. 

TRAINING FOR CREDIT MANAGEMENT PROFESSIONALS  

477.  Extensive  credit  management  training  (or  training  for  credit  management 
professionals) is normally offered by credit managers’ associations, sometimes in 
collaboration with higher education institutions. A key player in the provision of 
credit  management  training  is  the  UK-based  Chartered  Institute  of  Credit 
Management  (CICM).221  Established  in  1939,  CICM  is  the  largest  professional 
body  in  Europe  and  its  certified  qualification  are  widely  regarded  as  the  ‘gold 
standard’  in  the  profession.  Professional  training  is  also  offered  by  the  national 
associations  of  credit  managers,  which  are  grouped  under  the  Federation  of 
European Credit Management Associations (FECMA)222. In some countries, credit 
management training is also offered by business schools 

478.  An overview of training courses for credit management professionals offered by a 

representative sample of organizations is provided below223. 

221 See www.cicm.com  
222 See https://www.fecma.eu/home  
223  Economisti  Associati,  Nomisma,  Crif,  Milieu  :  Building  a  responsible  payment  culture  in  the  EU  – 
Improving the effectiveness of the Late Payment Directive (2011/7/EU) 

136 

 
 
 
 
Exhibit 11.5 Overview of Selected Training for Credit Management Professionals 

Organisation  Description 

Chartered 
Institute of Credit 
Management 
(CICM)  -  United 
Kingdom 

Through  its  Credit  Academy,  CICM  provides  training  leading  to  regulated  a  comprehensive 
range  of  training  options  and  Ofqual224-regulated  qualifications  that  have  become  the 
recognized  standard  in  the  credit  profession.  CICM  qualifications  are  subdivided  into  entry, 
intermediate and advanced level, and can be obtained for three different area of expertise (Credit 
& Collections Qualifications, Money and Debt Advice, and Enforcement). In addition to the 
above qualifications CICM organises conferences and regional events to support and keep up 
to date its members. Finally, CICM provides also educational material free of charge (e.g. 15 
cash flow management guides). 

Credit, Finance & 
Accounting 
Academy  GmbH 
(CREFIA 
Academy) 
Germany225 

- 

CREFIA  Academy  is  joint  venture  between  the  German  association  of  credit  managers 
(Bundesverband  Credit  Management)  and  the  Bochum  University  of  Applied  Sciences. 
CREFIA  offers  a  training  course  for  Certified  Credit  Manager,  subdivided  into  12  modules 
addressing  the  fundamentals  of  credit  management  (legal  conditional  framework  of  credit 
management,  risk  management,  external  business  diagnostics,  credit  policy  and  credit 
collections, etc.). This is a one-year programme (250 teaching hours), costing EUR 5 890 for 
members of the credit management association, EUR 6 490 for non-members. 

In  addition,  in  collaboration  with  Creditreform  (a  leading  provider  of  credit  information 
services), CREFIA also offers continuing education programs for Certified Business Analyst; 
Certified Credit Consultant; Certified Debt Collector.  

LUISS  Business 
School 
& 
Academy  ASK  - 
Italy226 

LUISS Business School offers an Executive Programme in Credit Management. Developed in 
collaboration with Ask (a management consulting firm specialising in credit management), the 
programme aims at providing the fundamental ‘technical tools’ required for credit management 
positions  and  is  structured  in  6  modules,  dealing  with  risk  analysis  techniques,  financial 
analysis,  financial  and  legal  aspects  of  credit  management,  negotiation  techniques,  and 
compliance  issues.  The  course  does  not  lead  automatically  to  any  certified qualification, but 
participants received credits that can be used to this effect. Implemented in person or online, the 
program lasts 2 months and costs EUR 4 000. 

Vereniging  voor 
Credit 
Management 
(VVCM)  – 
Netherlands227 

the 

VVCM offers three training courses in credit management leading to certifications recognized 
by  CPION  (Centrum  Post  Initieel  Onderwijs  Nederland),  namely:  (i)  Certified  Credit 
Practitioner  (CCP);  (ii)  Certified  Credit  Controller  (CCC);  (iii)  Certified  Credit  Manager 
(CCM). Duration and cost range from 30 weeks and EUR 3 850 for the CCP to one year and 
EUR 6 295  for  the  CCM.  VVCM  also  offers  continuing  education  for  Registered  Credit 
Managers on specific topics such as: ‘financial intelligence’ for credit managers; harmonization 
of  European  payments;  accounting  for  credit  managers;  relationship  between  credit 
management and cash & treasury management. Participants are awarded with the Registered 
Credit Manager title and are subsequently signed up in an exclusive register. 

Polish Institute of 
Credit 
Management 
(PICM) 
Poland228 

- 

PICM is the Polish association of credit managers, member of FECMA. PICM’s standard Credit 
Management Training Programme is divided into three main parts: (i) basic concepts of credit 
risk;  (ii)  credit  risk  assessment  and  credit  management  departments’  functions  within  an 
enterprise; and (iii) methodology of evaluating creditworthiness of an enterprise. The approach 
is characterized by a high degree of customization and duration and costs depend upon the on 
location and number of participants. 

224 https://www.gov.uk/government/organisations/ofqual 
225 See www.crefia.de  
226 See https://businessschool.luiss.it/program-credit-management/  
227 See https://verenigingvoorcreditmanagement.nl/ 
228 See https://picm.pl/en/  

137 

 
 
 
Organisation  Description 

Association 
Française 
des 
Credit  Managers 
Conseils 
et 
- 
(AFDCC) 
France229 

AFDCC is the French member of FECMA.  The association offers half a dozen diploma and 
certification courses (‘formations diplômantes et certifiantes’) for various professional profiles 
(Agent  de  recouvrement,  Chargé  de  recouvrement,  Analyste  Crédit).  Courses  leading  to  a 
certified  qualification  last one year  (500  –  550  hours).  The  ‘formations diplômantes’  have  a 
duration of 7-9 days and the cost is in the order of  EUR 2 550 – 3 050 for members (~ 20% 
more for non-members). 

AFDCC is also sponsoring a Master in Credit Management, hosted by Université Rennes1. The 
course has duration of one year (about 440 hours) and its cost is about EUR 15,000 (susceptible 
of being subsidized by a special vocational training mechanism). 

479.  The initiatives described above are essential to deliver knowledge and skills to the 
community  of  credit  professionals  and  to  build  the  ground  for  a  sound  credit 
management culture. Setting high standards and sharing best practices can help the 
businesses  where  trainees  work  or  for  which  they  provide  services  to  be  more 
conscious  about  the  costs  of  credit  and  linked  aspects  such  as  risk  assessment, 
payment terms, and recovery of payments. 

480.  However,  this  type  of  training  is  unlikely  to  benefit  SMEs,  either  directly  or 
indirectly, for two reasons. First, the cost of courses (ranging from EUR 4 000 up 
to EUR 15 000) and their long duration (generally, at least 2 weeks and up to one 
year) are scarcely compatible with the limited resources of smaller businesses, who 
therefore  are  unlikely  to  participate  in  significant  numbers.  Second,  and  most 
important, the recruitment of credit managers certified through one of these courses 
is simply not an option for many small businesses. Professional credit managers 
are expensive (in France, Germany, Italy, and Spain the annual entry wage is in the 
order of EUR 40 000 – 60 000, whereas mid-career professionals may earn up to 
EUR 70 – 85 000),230 and for a small firm the cost would not be commensurate with 
the benefits.  

481.  Having said that, however, extensive credit management training is vital to create 
a critical mass of training providers for SMEs and/or for implementing ‘train-the-
trainer’ schemes. 

2. 

OTHER CREDIT MANAGEMENT TRAINING INITIATIVES231  

482.  Next  to  extensive  credit  management  training  there  are  also  training  initiatives 
mostly of short duration either focusing on specific aspects of credit management 
or  providing  a  general  introduction  to  the  theme.  They  can  cater  both  credit 
management professionals in need of upgrading their skills as well as the broader 
business community, including SMEs owners/managers and their employees. 

229 See full catalogue: https://www.afdcc.fr/wp-content/uploads/2021/11/CF2022/  
230 For more details, Economisti Study 2022 
231 For more details, Economisti Study 2022 

138 

 
 
 
 
483. 

It has to be emphasized that the availability of these trainings differs substantially 
homogeneous across the EU (and UK)  

484.  France. In France, the offer of training courses in credit management is quite broad 
and diversified. This appears to be due to two interrelated factors, namely the great 
attention  paid  to  the  issue  of  late  payment  and  the  activism  displayed  by  the 
AFDCC in promoting a credit management culture (and therefore the services of 
its members). AFDCC is a major player: indeed its 2022 catalogue includes no less 
than 37 short term courses, some offered more than once and in various locations. 
These courses cover both financial and legal aspects (e.g. ‘Gérer les situations de 
recouvrement  difficile’,  ‘Guide  pratique  du  recouvrement  contentieux’,  etc.), 
typically last 1 or 2 days, and carry a cost in the EUR 760 – 1 200 range (with a 
30% increase for non-members). Other providers include public entities, such as 
the Conservatoire national des arts et métiers (CNAM) and the Centre National de 
la Formation Conseil en Entreprise (CNFCE);  business  associations, namely the 
Confédération des petites et moyennes entreprises (CPME), and some commercial 
entities  (KPMG).  These  courses  have  a  duration  of  1  to  3  days,  and  are 
implemented in person or online, with costs typically ranging between EUR 700 
for  1-day  courses  and  EUR 1 300  –  1 400  for  2-3  days.  Public  subsidies  or  tax 
rebates for the employers are available to reduce the cost of these trainings, namely 
through the ‘Contribution à la Formation Professionnelle232’ mechanism. 

485.  Germany.  The  German  market  for  credit  management  training  shows  some 
similarities with France’s but with a more limited role of public entities. Training 
is offered by CREFIA (see above), some commercial providers and Chambers of 
Commerce. CREFIA currently focuses on 1/2-day workshops on ‘Working Capital 
Management’ and related topics (‘Credit Policy’, ‘Receivables Realization’, etc.). 
Among commercial providers, the Technische Akademie Wuppertal (TAW) offers 
one day seminars in ‘Effective receivables management’ and related topics (e.g. 
‘Registration  of  claims  and  enforcement  of  claims  in  insolvency  proceedings’) 
(EUR 00)) and half a dozen courses in Receivables Manager, based on 3 modules. 
Similar seminars are also offered by a couple of private companies, NWB Verlag 
and wvib Schwarzwald AG. One day workshops are also implemented by several 
chambers  of  commerce  (e.g.  networking  events  on  liquidity  organized  by  IHK 
receivables 
Reutlingen,  seminar  on 
management’  held  by  IHK  Darmstadt,  seminar  on  ‘Professional  receivables 
management’ by IHK Akademy Koblenz). The IHK system also delivers training 
for  formal  certification  in  credit  management  through  a  specialized  subsidiary 
(DIHK-Bildungs-gGmbH).  Costs  show  some  differences  across  the  various 
providers. Chambers of commerce are the least expensive, with EUR 300 – 350 per 
seminar. CREFIA’s 1–2-day workshops sell for EUR 400 – 600 (20% higher for 
non-members), whereas commercial providers are predictably the most expensive, 
with EUR 700 for one-day seminars and EUR 1 800 for longer courses. 

‘Efficient  accounts 

receivable  and 

232  https://www.urssaf.fr/portail/home/espaces-dedies/contributions-de-formation-profe/la-contribution-a-
la-formation-p.html 

139 

 
 
 
 
486.  Spain. The Spanish market for credit management training seems to be quite small, 
with  very  few  players.  The  national  credit  management  association,  Asociación 
Gerentes  de  Crédito,  is  not  directly  involved  in  training  activities  but  rather 
cooperates  with  a  couple  of  consulting  firms,  Pere  Brachfield  Credit  &  Risk 
Consultants  and  Rosas  &  Nash,  and  one  law  firm  (Del  Cerro  Leon  Royo 
Abogados). The main actor is Pere Brachfield, whose principal is well known in 
Spain for his activities in support of better payment practices. The range of training 
courses currently on offer is fairly limited, consisting of a Máster Profesional en 
Créditos, Riesgos y Recobro de impagados (14 weeks, 125 hours) and a couple of 
webinars (‘Claves para un Recobro Exitoso de Impagados’ and ‘Neurocobranzas’, 
the  latter  focusing  on  psychological  aspects  of  credit  recovery).  Master  courses 
costs  are  EUR 1 350  and  the  webinars  costing  around  EUR 200  each.  Pere 
Brachfield is also active in the provision of mentoring and coaching, but elements 
gathered  during  interviews  suggest  that  this  market  is  shrinking  and  mostly 
comprised of sizeable enterprises (‘we have very few SME clients’). 

487. 

Italy. In Italy the offer of credit management training falls somewhere in between 
France and Germany on the one hand and Spain on the other. In 2021, the national 
association of credit managers, Associazione Credit Managers Italia (ACMI), had 
a  catalogue  with  30  plus  training  courses  and  webinars.  However,  along  with 
initiatives squarely focusing on credit management and related themes (‘basics of 
credit management’, ‘judicial recovery’, ‘techniques for phone collection’, etc.) the 
catalogue also included courses on other, less obvious topics (e.g. how to work with 
Excel spreadsheets or how the enhance presentation skills). A more focused offer 
is  provided  by  commercial  providers  and  business  schools.  For  instance,  Ask 
Advisory,  a  management  consultancy,  has  a  2022  catalogue  including  12  short 
training courses specifically dealing with credit management. An Executive Course 
in Credit Management (32 hours, spanning over 12 days) is offered by CUOA, a 
business school, while Cegos’ catalogue includes four 1-2 days training (‘Credit 
Management:  la  strategia  per  la  gestione  del  rischio  crediti’,  ‘Tecniche  di 
comunicazione per un recupero crediti efficace’, etc.). Chambers of commerce and 
business associations are involved in financial education for MSME, but courses 
tend to focus on more bread-and-butter issues (basic financial analysis, budgeting, 
etc.),  with  credit  management  not  being  addressed  or  being  mentioned  only  in 
passing. Finally, webinars and e-learning materials are organized/made available 
by some providers of credit information and other business intelligence services 
(CERVED  and  CRIF).  Information  on  costs  is  not  always  available,  but  prices 
appear  to  be  lower  than  in  France  and  Germany,  with  ACMI  1-2-day 
courses/webinars typically in the EUR 250 – 350 range for members (50-60% more 
for  non-members),  Cegos  1-2-day  trainings  selling  at  EUR 800  –  1 600,  and 
CUOA’s  executive  programme  selling  for  EUR 1 800.  As  in  France,  partial 
subsidization  may  be  available  under  various  public  schemes  (e.g.  voucher 
formazione, in Lombardy and Emilia-Romagna). 

488.  Malta. A very interesting best practice is represented by Malta, where the Malta 
Association  for  Credit  Management  (MACM)233  has  been  very  active  in 

233 https://www.macm.org.mt/home  

140 

 
 
 
proactively promoting the adoption of best practices in credit management also by 
SME. MACM’s experience is briefly summarized below: 

Malta: MACM’s Experience 

Established in 2001, MACM is a professional association of credit managers, member of FECMA. Like its 
sister  associations,  MACM  is primarily  involved  in  fostering the  development  of  the credit  management 
profession. In this context, MACM has a longstanding relationship with CICM, and it has been accredited 
to deliver CICM training courses leading to officially recognized qualifications. However, MACM has also 
been quite active in promoting the adoption of credit management practices in SMEs, through the 
organization  of  awareness  raising  workshops,  the  delivery  of  training  courses,  and  the  development  of 
dedicated materials, the latter being extensively used by MACM members in their work with small business 
clients. MACM has also been very active on the theme of late payments, through the organization of events 
on the LPD, the running of periodical surveys, and the cooperation with government authorities, namely 
with the development of materials disseminated on line).234 

489.  United  Kingdom.  The  UK  market  is  dominated  by  CICM  and  commercial 
providers,  with  the  distinctive  feature  of  a  prevalence  on  online  delivery  and  e-
learning  modalities.  Besides  training  for  certified  credit  manager  and  related 
qualifications  (see  above),  CICM  also  delivers  several  virtual  workshops  of 
variable duration, covering topics of interest for both people already working in 
credit management and a more general business audience (‘Collections for the new 
Credit  Future’,  ‘Best  Practice  Skills  to  Assess  Credit  Risk’,  etc.).  Commercial 
providers include  consultancies and training centres, some of which specifically 
focusing  on  credit  management  training  (Credit  Management  Training  Ltd  and 
Credit  Management  Group).  Their  offer  mostly  consists  of  short  e-learning 
modules, each lasting 2-4 hours and covering very practical aspects of the credit 
management process (from ‘Impactful collection letters and emails’ to ‘Customers 
behaviours to deal with’). Prices for individual modules are at £ 120 – 150, with 
full packages costing around £ 1,000.  

3. 

SUMMARY OF THE ANALYSIS 235 

490.  Currently, the offer of management training available in the EU is extensive, with 
several high-profile service providers, offering both structured courses providing 
formal  qualifications  and  shorter  trainings.  The  problem  is  that  this  offer  is 
extremely uneven across the EU: there is a limited number of Member States with 
a highly developed credit management training industry and a majority where this 
activity is not as developed. 

491.  Another problem that has been identified is that the current offer is not suitable to 
smaller businesses, because of their cost and duration, the majority of users being 
mid-caps, and large enterprises. 

492.  Finally, there is a lack of mechanisms proactively promoting the adoption of best 
practices  by  SMEs.  This  is  largely  due  to  the  highly  specific  nature  of  credit 

234 https://www.macm.org.mt/macmlibrary?ag=Credit%20Guidelines 
235 Economisti Study 2022 

141 

 
 
 
 
 
 
 
management, a theme that cannot be easily handled by the ‘generalist’ staff of a 
typical chamber of commerce or business association, and the commercial nature 
of many suppliers of training. However, the experience of MACM shows that it is 
indeed possible to adopt a proactive approach, capable of reconciling the business 
orientation of the credit management profession with public policy objectives. 

142 

 
 
M. ANNEX 13:  RATES OF STATUTORY INTERESTS  

493.  Rates established according to Art 2(6) of the LPD 

Member State  

AUSTRIA  
BELGIUM  
BULGARIA  
CROATIA  
CYPRUS  
CZECHIA  
DENMARK  
ESTONIA  
FINLAND  
FRANCE  
GERMANY  
GREECE  
HUNGARY  
IRELAND  
ITALY  
LATVIA  
LITHUANIA  
LUXEMBOURG  
MALTA  
NETHERLANDS  
POLAND (health sector)  
POLAND (other sectors)  
PORTUGAL  
ROMANIA  
SLOVAKIA  
SLOVENIA  
SPAIN  
SWEDEN  

1 January - 30 June 2023  
11.08%  
10.50%  
10.00%  
10.50%  
10.50%  
15.00%  
9.90%  
10.50%  
10.50%  
12.50%  
10.62%  
10.50%  
21.00%  
10.50%  
10.50%  
10.50%  
10.50%  
10.50%  
10.50%  
12.00%  
14.75%  
16.75%  
10.50%  
15.00%  
10.50%  
10.50%  
10.50%  
11.00% 

143 

 
 
 
 
 
 
N.  ANNEX 14:  OPTIONS DISCARDED AT AN EARLIER STAGE (IN 

DEPTH DESCRIPTION) 

1. 

MANDATORY USE OF E-INVOICING IN PAYMENTS 

494.  With the adoption of proposal  COM(2022) 701236 amending the VAT Directive 
and  introducing  a  more  widespread  use  of  e-invoicing,  this  point  is  now  to  be 
considered as part of the (dynamic) baseline scenario. In addition the legal base for 
COM (2022) 701 is Article 113 TFEU, whereas the legal base for this initiative is 
Article 114 TFEU, therefore there is also an issue of legal feasibility.  

495. 

It  should  be  emphasised  that  the  proposal  will  use  e-invoicing  in  commercial 
transactions as the basis for the introduction of a real-time and transaction-based 
reporting system to improve tax collection and fight tax fraud and tax avoidance. 
Further, the introduction of a reporting system based on e-invoicing aims to reduce 
businesses’  administrative  costs237.  Its  impact  on  payment  behaviour  must  be 
regarded only as a possible, ancillary effect238.  

496.  Some  studies  appear  to  suggest  that  e-invoicing  has  even  had  the  effect  of 
extending payment periods239. The Economisti Study 2022 concluded that in B2B 
transactions e-invoicing is potentially a facilitator of better payment behaviour but 
in itself it is unlikely to have a significant impact in changing or improving that 

236 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52022PC0701 
237  Economisti  Study  2022  highlights  that  e-invoicing  limits  errors  in  the  invoice  and  thus  preventing 
possible payment disputes: “ According to Freedz, an e-invoicing platform “the reliability of the data limits 
errors  and  invoice  rejections,  and  therefore  the  sources  of  disputes  with  your  suppliers”)  as  well  as  by 
Basware,  a  leading  player  in  accounts  payable  automation  and  procure-to-pay  solutions  (“You’ll  also 
decrease  the  likelihood  of  time-consuming  invoice  disputes  since  automated  invoice  processing  uses 
automatic data extraction to ultimately reduce the chances of manual entry errors”) 
238 Economisti Study 2022. In the Study refereferences are made to some dedicated studies carried  out in 
France on htis matter 1)  Ministère de l'Économie, des Finances et de la Relance, Rapport de la Direction 
Générale des Finances publiques - La TVA à l’ère du digital en France, Octobre 2020 (page 53).  which 
clearly  guards  against  excessive  expectations  regarding  the  effects  of  e-invoicing  on 
payment  behaviour  (“Or  pour  l’ensemble  des  acteurs  rencontrés  …  le  simple  envoi 
dématérialisé  des  factures  n’est  pas  de  nature  à  diminuer  mécaniquement  la  part  des 
paiements excédant les délais légaux.“) 
239 O'Neill B, Late payment practices: is this the ticking time bomb of the UK Economy? An analysis into 
the  payment  practice  data  of  UK 
at 
https://towardsdatascience.com/late-payment-practices-is-this-the-ticking-time-bomb-of-the-uk-economy-
5b958e4dd109  .  Published  in  early  2020  and  based  on  the  payment  performance  data  declared  by  large 
companies under UK legislation, the study found that enterprises making use of e-invoicing had marginally 
longer  payment  times,  with  an  average  of  40  days,  compared  with  36  days  for  businesses  not  using  e-
invoices. At the same time, users of e-invoices were marginally more punctual in their payments to suppliers, 
with 28% of invoices paid late compared with 30% of late payments for enterprises not using e-invoices 

corporates,  28 

January  2020, 

accessible 

large 

144 

 
 
 
 
behaviour in absence of other factors, namely better enforcement240. As noted by 
Spanish stakeholders at the time of the passing of the national law introducing e-
invoicing  in  commercial  transactions  ‘La  factura  electrónica  deja  constancia  del 
retraso, pero por sí sola no mejora los plazos’241. 

497.  This conclusion is also confirmed by the evidence of the impact of e-invoicing in 
G2B  payments  at  least  in  countries  traditionally  characterised  by  poor  payment 
behaviour  of  their  public  authorities,  such  as  Italy  and  Spain.  In  these  Member 
States, the introduction of e-invoicing, in contracts where the public authority is a 
debtor, which is an obligation under Directive 2014/55/EU and whose roll-out was 
accelerated by the infringement procedures launched by the Commission242, was 
instrumental  to  ascertain  the  magnitude  of  the  amounts  owed  by  public 
administrations, which in turn made it possible to monitor the situation and adopt 
corrective actions. 

498.  The results of the SME Panel consultation on the use of e-invoicing are as follows:  

Table 13: Results of SME panel consultation on e-invoicing 

7. Which of the following 
options best describes your 
experience with e-invoicing? 
e-invoicing helps us to receive 
payments on time 
e-invoicing does not help us to 
receive payments on time 
We do not use e-invoicing 
Don't know 
Total 

Answers 

% 

291 

415 
168 
65 
939 

31.0% 

44.2% 
17.9% 
6.9% 
100.0% 

2. 

A  SYSTEM  OF  MANDATORY  OFFSETTING  OF  DEBTS  OWED  TO  THE  STATE 
WITH CREDITS OWED BY THE STATE  

499.  The  2019  EP  Resolution  ‘urged’  the  Commission  and  the  Member  States  to 
consider  mandatory  forms  of  adequate  compensation,  such  as  offsetting  as  an 
additional measure to protect the liquidity of SMEs and prevent bankruptcies.  

500.  This measure would consist in offsetting the debts owed to ‘the State’ by a legal 
person  or  enterprise  (in  the  form  of,  for  example,  local  taxes,  revenue,  social 

240  ”Overall,  it  can  be  concluded  that  in  B2B  transactions  e-invoicing  does  contribute  to  create  the 
conditions for prompt payments, but its role remains secondary, and the impact is likely to be small, if not 
supported by other accompanying measures and better enforcement of the rules.”  
241 “e-invoicing certifies the delay, but on its own it does not improve payment periods” in Otiniano Pulido 
C,  Enmiendas  a  Crea  y  Crece:  lo  que  piden  los  negocios,  CincoDías,  18  Enero  2022,  accessible  at 
https://cincodias.elpais.com/cincodias/2022/01/17/companias/1642434771_076547.html 
242 The Commission opened an infringement procedure against Italy in 2014 and Spain in 2015 for payment 
delays of their public authorities. The procedures are still ongoing.  

145 

 
 
 
 
 
 
 
contributions)  with  credits  that  the  State  owes  to  them  (in  the  specific,  unpaid 
debts).  

501. 

In  the  consultations  carried  out  in  the  context  of  this  Impact  Assessment,  some 
stakeholders have also made reference to this specific measure243.  

502.  There are several obstacles for this measure:  

1)  Legal  competence/subsidiarity.  Issues  such  as  local  taxation  or  direct  taxation,  are 
matters that do not fall within the powers conferred to the EU institutions by the Treaty. 
Also, in the area of social security, the general principle is that each Member States is 
free to design its own national security system244.  

2)  Even speculating that the EU institutions might be empowered to  take action in this 
area245,  there  are  complex  technical  aspects  that  would  generate  an  inordinate 
administrative burden, and ultimately would run counter the very objective of ensuring 
prompt payment 
a)  Firstly, the ‘synallagmatic’ relation, that defines the type of relations covered by 
LPD (‘commercial transactions’), is not present any longer. Offsetting would entail 
in fact the introduction, in the relation debtor-creditor, of new parties ( other local 
authorities for example), who would have their revenue reduced without the benefit 
of receiving goods or services in exchange.  

b)  Secondly,  the  implementation  of  such  system  would  be  extremely  difficult  in 
Member  States  with  a  federal  administration,  and  would  possibly  raise 
constitutional problems  

c)  Thirdly,  the  offsetting  might  actually  disincentive  prompt  payment  by  the 
authorities. They would be more prone to ‘hold on’ to liquidity as much as possible, 
since they could be subject to offset debts from other authorities.  

d)  Fourthly,  tax  payers  would  delay  payment  of  their  taxes  in  the  expectation  of  a 

future offsetting, with disastrous consequences on the revenue. 

e)  Finally the costs for public finance that would derive from the management of the 
massive  flow  of  data  as  well  as  from  the  need  for  an  adequate  monitoring, 
certification and control system cannot be ignored, given the vast number of public 
administrations involved and the variety of types of debt involved 

3)   The subject was discussed with the Member States representatives in the context of 
the Late Payment Expert Group meeting, The national representatives expressed strong 
reservations against this option. 

3. 

MANDATORY  REPORTING  ON  PAYMENT  PRACTICES  FOR  BUSINESSES  AND 
PUBLIC AUTHORITIES 

503.  The  2019  EP  Resolution  explicitly  states  that246 ’the  introduction  of  enhanced 
transparency  concerning  payment  behaviour  could  discourage  late  payment; 

243 Call for Evidence Feedbacks F3389200, F3389163 
244 https://www.europarl.europa.eu/factsheets/en/sheet/55/social-security-cover-in-other-eu-member-states 
245 By, for example, invoking Article 352 TFEU, which requires nevertheless unanimity in the Council  
246 EP Resolution 2019, point 4. 

146 

 
 
 
 
believes that access to this information can act as an incentive for public entities 
and  businesses  to  improve  their  payment  practices  and  uphold  their  monetary 
obligations; encourages the Member States to consider different possible forms of 
mandatory publication of information on payment behaviour, such as databases or 
registers, for both the private and public sectors’. 

504.  Mandatory  reporting  obligations  on  payment  performance  and  practices  for 
businesses and public authorities have been in place for quite a number of years in 
the  UK.  Firstly,  UK  public  authorities  are  required  to  publish  their  payment 
performance  against  an  identified  benchmark  (90%  of  undisputed  and  valid 
invoices from SMEs within 5 days and 100% of all undisputed and valid invoices 
to  be  paid  within  30  days)  247.  Secondly,  large  businesses  are  required,  since 
2017248, to publish their payment practices, thirdly, since 2019 businesses bidding 
for  government  contracts  in  excess  of  £5  million  a  year  are  required  to  provide 
confirmation that they have systems in place to ensure that organisations in their 
supply  chain  are  paid  on  time.  If  these  requirements  are  not  demonstrated, 
contracting authorities may exclude the organisation from bidding249. 

505. 

In Poland, as  from  2023, large businesses  (i.e. those exceeding  50  million  EUR 
annual income) are obliged to report  information  on their payment terms. These 
reports are publicly available250. 

506.  The  SME  Panel  carried  out  for  the  purposes  of  this  impact  assessment  report 
indicated that 71,6% of respondents consider mandatory reporting for businesses 
on their payment performance as very useful or useful. 

507.  Despite the above, the option of introducing reporting obligations for businesses 
and public authorities has been discarded on the grounds of political feasibility. On 
16  March  2023,  the  Commission  presented  its  strategy  to  boost  long-term 
competitiveness. One of the key pillars is the creation of a regulatory framework 
suitable for competitiveness and growth, which includes a target of 25% reduction 
of reporting requirements on businesses introduced by EU legislation251. 

508.  Disclosures  on  payment  practices  are  laid  down  in  Corporate  Sustainability 

Reporting Directive252 (CSRD). 

247 https://www.gov.uk/guidance/prompt-payment-policy 
248 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/831507/p
ayment-practices-performance-reporting-requirements.pdf 
249  https://www.gov.uk/government/publications/procurement-policy-note-0821/procurement-policy-note-
0821-taking-account-of-a-bidders-approach-to-payment-in-the-procurement-of-major-government-
contracts 
250 https://www.biznes.gov.pl/pl/opisy-procedur/-/proc/125 
251 https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1668 
252 Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending 
Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as 

147 

 
 
 
 
509.  According  to  the  CSRD,  all  large  companies  and  all  companies  with  securities 
listed  on  EU  regular  markets253,  as  well  as  listed  SMEs  (following  a  three-year 
lead-in period), except for micro-enterprises, are required to disclose sustainability 
information. This helps investors, civil society organisations, consumers, and other 
stakeholders to evaluate the sustainability performance of companies, subject to the 
criteria or perspective of ‘double materiality’. 

3.1.  DOUBLE MATERIALITY 

510.  CSRD requires undertakings to report both on the impacts of the activities of the 
undertaking  on  people  and  the  environment  (impact  materiality),  and  on  how 
sustainability  matters  affect  the  undertaking  (financial  materiality).  More 
specifically: 

1)  A  sustainability  matter  is  material  from  a  financial  perspective  if  it  triggers  or  may 
trigger  material  financial  effects  on  the  undertaking  (when  it  generates  risks  or 
opportunities  that  have  an  influence  (or  are  likely  to  have  an  influence)  on  the 
undertaking’s cash flows, performance, position, development, cost of capital or access 
to finance in the short, medium- and long-term time horizons.). 

2)  A sustainability matter is material from an impact perspective when it pertains to the 
undertaking’s material actual or potential, positive or negative impacts on people or 
the  environment  over  the  short-,  medium-  and  long-term  time  horizons.  A  material 
sustainability  matter  from  an  impact  perspective  includes  impacts  caused  or 
contributed  to  by  the  undertaking  and  impacts  which  are  directly  linked  to  the 
undertaking’s operations, products, and services through its business relationships. 

511.  Undertakings  should  consider  each  materiality  perspective  in  its  own  right,  and 
should  disclose  information  that  is  material  from  both  perspectives  as  well  as 
information that is material from only one perspective. 

512. 

If the undertaking concludes that a topic is not material and therefore it omits all 
the  Disclosure  Requirements  in  a  topical  ESRS,  it  shall  briefly  explain  the 
conclusions of its materiality assessment for the topic. 

513.  Companies  subject  to  the  CSRD  will  have  to  report  according  to  European 
Sustainability Reporting Standards (ESRS). The draft standards are developed by 
the European Financial Reporting Advisory Group (EFRAG)254. The standards will 
be  tailored  to  EU policies,  while  building  on  and  contributing  to  international 
standardisation initiatives. The Commission will adopt standards through delegated 
acts. A first set of standards will be adopted by 30 June 2023, based on the draft 
standards published by EFRAG in November 2022255. Sector-specific standards as 

corporate 

sustainability 

regards 
content/EN/TXT/?uri=celex%3A32022L2464  
253 The disclosure requirements of the CSRD proposal would not apply to SMEs with transferable securities 
listed on SME growth markets or multilateral trading facilities. 
254 https://www.efrag.org/ 
255

https://eur-lex.europa.eu/legal-

reporting 

 First Set of draft ESRS - EFRAG 

148 

 
 
 
 
 
well as simplified standards for listed SMEs will have to be adopted by June 2024. 
Standards will come into force no earlier than 4 months after their adoption and 
will have to be reviewed every 3 years. 

3.2. 

PAYMENT PRACTICES’ DISCLOSURE 

514.  CSRD recognises that ‘information about the management of the undertaking and 
the quality of relationships with customers, suppliers and communities affected by 
the activities of the undertaking, helps users to understand an undertaking’s risks 
and impacts related to sustainability matters. Information about relationships with 
suppliers includes payment practices relating to the date or period for payment, the 
rate of interest for late payment or the compensation for recovery costs referred to 
in Directive 2011/7/EU of the European Parliament and of the Council’ and that 
‘Increasing the amount of information about payment practices should empower 
other undertakings to identify prompt and reliable payers, detect unfair payment 
practices, access information about the businesses they trade with, and negotiate 
fairer payment terms’. 

515.  Therefore,  payment  practices  have  been  singled  out  as  a  specific  category  of 
information that has to be included in the governance factors of the sustainability 
reporting standards. ’The management and quality of relationships with customers, 
suppliers and communities affected by the activities of the undertaking, including 
payment practices, especially with regard to late payment to small and medium-
sized undertakings’. 

EFRAG draft standard ESRS G1 Business conduct, Disclosure Requirement G1-6 

Draft ESRS  G1 Business Conduct covers all  governance-related disclosures, including payment  practices. 
ESRS G1 has to be read in conjunction with ESRS 1 General Principles and ESRS General requirements. In 
ESRS  2,  EFRAG  proposes  that  some  governance  disclosures  included  in  this  ESRS  G1  are  subject  to 
materiality assessment (i.e. they have to be disclosed only if material for the company in question  –the 
double materiality principle applies-), namely the payment practices disclosure. 

‘31.  The  undertaking  shall  provide  information  on  its  payment  practices  to  support  transparency  about 
these practices given the importance of timely cash flows to business partners, especially with respect to 
late payments to small and medium enterprises (SMEs). 

32. The objective of this Disclosure Requirement is to provide insights on the contractual payment terms 
and the average actual payment terms especially as to how these impact SMEs and specifically with respect 
to late payments to SMEs. 

33. The disclosure under paragraph 31 shall include: 

(a) the average time the undertaking takes to pay an invoice from the date when the contractual or legal 
term of payment starts to be calculated, in number of days; 

(b)  a  description  of  the  undertaking’s  standard  payment  terms  in  number  of  days  by  main  category  of 
suppliers and the percentage of its payments aligned with these standard terms; 

(c) the number of legal proceedings (currently outstanding) during the reporting period for late payments; 
and 

149 

 
 
(d) complementary information necessary to provide sufficient context. 

 AR  15.  In  some  cases,  the  undertaking’s  standard  contractual  payment  terms  may  differ  significantly 
depending on country or type of supplier. In such cases, information about the standard terms per main 
categories  of  suppliers  or  country  or  geographical  region  could  be  examples  of  additional  contextual 
information to explain the disclosures in paragraph 33 (b). 

AR 16. An example of what the description of standard contract term disclosures in paragraph 33 (b) could 
look like: 

ABC’s  standard  contract  payment  terms  are  payment  on  invoice  for  wholesalers  which  encompass 
approximately 80% of its annual invoices. It pays for services received within 30 days after receipt of the 
invoice which are about 5% of its annual invoices. The remainder of its invoices are paid within 60 days of 
receipt except for those in country X which in accordance with the marketplace standards are paid within 
90 days of receipt.’ 

516.  At  the  moment  of  the  submission  of  this  Impact  assessment,  discussions  are 
ongoing within the Commission services and with EFRAG to address the content 
of these draft standards, an in particular elements which are currently not addressed 
(e.g. definition how double materiality will affect the actual reporting (see above), 
how  payment  terms  are  negotiated,  information  about  percentage  of  payments 
within  the  standard  contractual  payment  terms,  information  about  percentage  of 
payment made later than the contractual payment term, information about interests 
and compensation paid, alternative dispute resolution procedures offered to settle 
payment disputes).  

4. 

ENSURING SYNERGIES WITH PUBLIC PROCUREMENT PROCEDURES BASED ON 
ARTICLE 57(4) (G) 

517.  The 2019 EP Resolution pleaded for better synergies between public procurement 
framework and late payment objectives. In particular, the Resolution stressed ‘the 
importance of public procurement as a means of improving the functioning of the 
single  market;  calls  for  consideration  of  enhanced  synergies  between  the  Late 
Payment Directive and public procurement rules, in particular the possibility for 
contracting  authorities  to  take  action  to  enable  the  exclusion  of  non-performing 
contractors from future procurements if subcontractors are not paid in time by the 
main contractor when it is required to do so’ with explicit reference to Article 57 
(4) (g) of Directive 2014/24/EU. 

518.  This option has been discarded on the grounds of legal and technical feasibility. 
The issue was indeed assessed in the Economisti Study 2022, which presented the 
complexity  of  this  solution,  and  its  several  legal  uncertainties.  The  information 
below is extracted from the Economisti Study.  

150 

 
 
them 
in 

519.  Article 57(4)(g) of Directive 
2014/24/EU  provides  an 
public 
for 
instrument 
authorities 
sanction 
to 
economic  operators,  by 
from 
excluding 
participating 
the 
tendering  procedure,  when 
the economic operators have 
shown  to  be  deficient  in 
performing 
substantive 
requirements  under  prior 
As 
public 
indicated above, with a view 
to 
synergies 
between  LPD  and  public 
procurement rules,  

enhancing 

contracts. 

Article 57(4)(g) Directive 2014/24/EU 

Contracting  authorities  may  exclude  or  may  be 
required  by  Member  States  to  exclude  from 
participation  in  a  procurement  procedure  any 
economic  operator  in  any  of  the  following 
situations: 
[…] 
g)  where  the  economic  operator  has  shown 
the 
significant  or  persistent  deficiencies 
performance of a substantive requirement under 
a  prior  public  contract,  a  prior  contract  with  a 
contracting entity or a prior concession contract 
which  led  to  early  termination  of  that  prior 
contract,  damages  or  other  comparable 
sanctions; 

in 

520.  Conditions for Applicability. The application of the exclusion ground under Article 
57(4)(g) is subject to many conditions, which makes it in practice an unlikely tool 
for combating late payment in public procurement. Based on the Court of Justice 
of  the  European  Union’s  (CJEU)  interpretation  of  Article  57(4)(g),256  a  public 
authority  can  only  exclude  an  economic  operator  from  a  public  procurement 
procedure: 

1)  if that economic operator was excluded in a previous tendering procedure;  
2)  on  the  grounds  that  the  economic  operator  has  shown  significant  or  persistent 
deficiencies in the performance of a substantive requirement under that prior contract 
which led to early termination of that prior contract; and 

3)  after that, the subsequent public authority, after conducting its own evaluation of the 
integrity  and  reliability  of  the  economic  operator,  considers  that  such  deficiencies 
entail breaking the relationship of trust with the economic operator in question.  
521.  To use the exclusion ground set out in Article 57(4)(g) as a means to combat late 
payment, it will thus be necessary to become a practice or a standard that public 
authorities stipulate, in the contracts with economic operators, conditions on direct 
and prompt payment of subcontractors, so that payment conditions are considered 
as substantive requirements.  

522.  Nevertheless, even when the practice of making payment conditions a substantive 
requirement  is  introduced,  the  burdens  to  exclude  a  contractor  because  of  non-
compliance  with  payment  conditions  are  very  high.  As  indicated  above,  non-
compliance has  to  be of such level  that it can be considered as a  ‘significant  or 
persistent deficiency’, which can be considered by a subsequent public authority as 

256 
October 
content/EN/TXT/?uri=CELEX%3A62018CJ0267  

C-267/18 

Case 

of 

3 

2019, 

Delta, 

https://eur-lex.europa.eu/legal-

151 

 
 
 
 
 
entailing  the  breaking  of  the  relationship  of  trust  with  the  economic  operator  in 
question. 

523.  The above analysis is broadly supported by the views and evidence provided by 
national authorities participating in the Targeted Consultation. Indeed, none of the 
members  of  the  Expert  Group  on  Public  Procurement  provided  any  evidence  of 
cases  of  exclusion  happening  on  those  grounds.  There  are  however  some 
differences in the positions voiced by Member States. 

524.  Some  Member  States  (Austria,  Bulgaria,  Malta,  Poland,  Portugal,  Romania) 
dispute the very idea that Article 57(4)(g) could be interpreted as to exclude bad 
payers.  This  is  typically  the  case  of  countries  that  emphasise  the  distinction 
between  ‘public’  nature  of  contracts  between  contracting  authorities  and  main 
contractors  and  ‘civil/commercial  law’  nature  of  contracts  between  main 
contractors  and  their  subcontractors/suppliers.  In  some  cases,  the  arguments 
offered are reminiscent of those put forward to motivate the non-adoption of the 
clause on the direct payment to subcontractors. 

525.  Other countries do not exclude a priori the possibility of relying on Article 57 (4) 
(g),  but  they  emphasise  the  need  to  meet  the  necessary  prior  conditions  and/or 
highlight  the  heavy  burden  of  proof  involved.  However,  also  in  these  cases  no 
evidence was provided regarding the actual use of the provision. 

526. 

In 3 Member States (Italy, Hungary, and Spain), as well as in the UK, the exclusion 
of bad payers from public procurement is indeed envisaged. However, this is not 
linked to Article 57(4)(g) but is based on specific provisions adopted by national 
authorities.  

527.  Finally, in Croatia and France, the issue of excluding bad payers based on Article 
57(4)(g)  is  deemed  to  be  immaterial  given  the  widespread  recourse  to  direct 
payment  to  subcontractors.  In  Croatia,  national  authorities  consider  that  ‘[s]ince 
there is an obligation for contracting authority to pay directly to subcontractors … 
this  reason  for  the  exclusion  of  the  economic  operator  for  non-payment  or  late 
payment to the subcontractor is not applicable.’ Likewise, French authorities noted 
that ‘To the best of our knowledge this provision has never been interpreted as to 
allow the exclusion of bidders that have not respected the payment terms with their 
subcontractors. However, the question is unlikely to arise as, as said above, in most 
French  public  contracts,  subcontractors  receive  direct  payment  from  the 
contracting authority.’ 

5. 

IN G2B CONTRACTS, ACCELERATE PAYMENTS FOR LOW VALUE CONTRACTS 
NOT REQUIRING A VERIFICATION PROCEDURE  

528. 

In Ireland public authorities commit to pay their suppliers in 15 days (see Annex 
23). On this basis, it was initially considered to  explore and  assess an option to 
accelerate payments in some specific public contracts, i.e. those conferred on the 
basis  of  direct  purchasing  and  that  are  most  likely  awarded  to  micro  or  small 
contractors. The objective was to speed up injection of liquidity for these smaller 
operators.  The  focus  was  also  on  those  contracts  not  requiring  a  verification 

152 

 
 
procedure,  to  simplify  the  effectiveness  of  this  measure.  However,  this  option 
immediately encountered the following legal difficulties:  

1)  It would require intervention of the EU in an area that is not currently regulated by the 
EU  Public  Procurement  Directives.  To  do  so,  it  should  be  demonstrated  the  cross-
border damage to justify the need of EU intervention. At the moment the Commission 
does not dispose of such evidence.  

2)  It would create inconsistencies with the implementation of the UTP Directive in the 
agrifood sector, for example in those low value contracts consisting in the supply of 
food (e.g. a catering contract).  

O.  ANNEX 15:   SME TEST 

1. 

MAIN CONCLUSIONS OF THE SME TEST 

529.  SMEs are within the scope of this legislative initiative and are also the intended 
main beneficiaries of this revision. This initiative is considered highly relevant for 
SMEs, as it affects all EU SMEs. 

530.  Looking at companies as creditors, companies from all size classes report regular 
and/or  occasional  occurrences  of  late  payments  but  getting  paid  on  time  affects 
SMEs  disproportionately  compared  to  larger  companies.  Late  payments  are  an 
obstacle to growth especially in micro-enterprises, also in terms of employment. 
SMEs in the EU (35%) are more likely than SMEs in the US (29%), Canada (24%) 
or Japan (8%) to  say that  payment delays  are among the biggest problems  their 
enterprise faces. 

531.  The  recent  problems  (e.g.  COVID-19,  rising  energy  prices,  inflation  etc.)  had  a 
negative impact on the payment behaviour of the clients for almost half of SMEs. 
Currently, only 3% of SMEs have all invoices or turnover paid on time and a higher 
percentage of SMEs have more than 50% of their invoices (7%) or turnover (9%) 
paid late.  

532. 

In the SME panel, 72% of SMEs are not comfortable when clients require to agree 
to accept payment 60 days or more from the date of the invoice, with no significant 
differences by size of vendor. 44% of SMEs asks to be paid within 30 days and 
42% within 60 days, with marked differences by size of company, as many more 
smaller companies257 ask to be paid within 30 days. 

533.  Regarding unfair payment practices, around 1 out of 4 SMEs is always or often 
confronted  with  “clients  that  modify  retroactively  key  contractual  provisions  in 
order to postpone the payment”, with “clients deliberately delaying the acceptance 
of services/goods” and with “clients that pay with financial products so that in order 
to claim payment within the agreed contractual terms, they have to pay fees and/or 

257  83%  of  self-employed  and  50%  of  micros  ask  to  be paid within  30  days  (around  30% for  small  and 
medium), 50% of small and medium-sized companies ask to be paid within 60 days (38% for micros and 
18% for self-employed). 

153 

 
 
 
discounts”. Paying interests and the EUR 40 compensation is never used in 80% of 
cases.  

534.  5-10%  of  total  administrative  work  for  an  SME,  equal  to  6-10  man-days  (Plum 
Consulting 2017), is spent on average chasing late payments. SME panel reveals 
that to tackle late payments, one third of SMEs spent more than 100 hours and one 
third of SMEs more than EUR 1 000 per year in informal actions, while 42% of 
SMEs spent  more than 20 hours (with 17% spending  more than 100 hours) and 
43%  spent  more  than  EUR 1000  in  formal  actions.  On  the  remedies  side,  the 
majority of SMEs solve late payment problems directly with the other business. 

535.  Looking  at  companies  as  debtors,  the  payment  behaviour  of  large  companies 
significantly differs from that of smaller enterprises, as the larger the company is, 
the worse payment performance it is likely to exhibit.  

536.  The most used way to define payment conditions is negotiation on a case-by-case 
basis (41%), but -especially when there is a difference in size (also between SMEs)- 
SMEs either impose (30%) or are imposed (17%) payment terms to/from clients.  

537.  For  the  vast  majority  of  SMEs,  late  payment  affects  the  well-being  of 

entrepreneurs, generating stress and anxiety.  

1.1. 

PREFERRED POLICY OPTION 

538.  The preferred option (PO1A, 2A, 3B) is supported by SMEs in the SME panel and 
through the public consultation. Overall, all sizes of SMEs  can benefit from the 
preferred option, even though microenterprises should be less affected by the costs 
and  obtain  more  benefits  compared  to  other  size  classes  (for  instance,  while 
capping is strongly supported by SMEs, the 30 days capping is more favoured by 
microenterprises).  As  microenterprises  are  more  affected  by  late  payments than 
other sizes of SMEs, those expected benefits are more likely to translate into better 
performance of companies with 0-9 employees. 

1.2. 

POLICY OPTION 1 - FIX THE FRAMEWORK  CONDITIONS TO 
PREVENT LATE PAYMENTS 

539.  Capping  payment  terms  (and  therefore  the  deletion  of  the  concept  of  “grossly 
unfair”) is broadly supported by the SME community and would likely benefit at 
least  3  out  of  4  SMEs  of  all  sizes.  Around  41%  of  SMEs  on  average  would 
particularly  benefit  from  capping  at  30  days,  with  broader  coverage  for  micros 
(50%), while 35% of SMEs on average would particularly benefit from capping at 
60 days, with broader coverage for small and medium-sized companies (43%). 

540.  Capping of the verification / acceptance procedure at 30 days would likely benefit 
between 25% and 66% of SMEs,  with broader coverage for small and medium-
sized companies. 

541.  Access to credit management and financial literacy trainings can provide a direct 
benefit  to  SMEs  and  it  has  found  near-universal  support  in  the  stakeholder 
consultation. 

154 

 
 
1.3. 

POLICY OPTION 2 - FOSTER TIMELY PAYMENT 

542.  While  making  payment  of  interests  and  compensation  mandatory  will  benefit 
creditors of all sizes, without changes in payment behaviour its costs could affect 
more the companies that are more likely to be late payers, therefore large, but also 
small and medium companies. 

543.  The  appointment  of  enforcement  bodies  empowered  to  issue  administrative 
sanctions and publish the name of offenders is the most favoured among all options. 
This  option  would  mostly  benefit  companies  that  are  more  frequently  paid  late, 
therefore SMEs in general. Given that the likelihood of paying late increases with 
the size of the company, especially micros should be less affected by this option in 
terms  of  costs  (fines).  Would  enforcement  bodies  be  responsible  only  for 
monitoring implementation, benefits would be reduced for businesses that are paid 
late as their deterrent effect is lower, but will also lower additional costs for late 
payers (mainly large companies and small and medium companies). 

544.  Ensuring that subcontractors in public tenders are paid promptly is supported by 
the  SME  community.  Contractors  of  above  EU  thresholds  works  contracts  will 
have  to  show  that  they  have  paid  their  own  subcontractors  on  time.  Those 
administrative costs may likely be born only by a limited quota of SMEs winning 
above-EU  threshold  works  contracts;  the  option  would  help  making  sure  that 
around ¼ of the aggregated value, which goes indirectly to SMEs, is paid promptly. 

1.4. 

POLICY  OPTION  3  -  EMPOWERING  SMES  AND  ENSURING 
MORE FAIRNESS IN BUSINESS TRANSACTIONS 

545.  This option targets only those payments that are already late and focuses on helping 
the creditors recover their debts. SMEs usually avoid going to court, for lack of 
financial means or fear of jeopardising business relationships. The main benefits to 
businesses come from reduced enforcement costs to chase late payments. The costs 
to businesses are relatively limited, as all parties benefit from mediation services 
and clear definitions of unfair practices;  even debtors will have reduced costs if 
cases go to a mediation system rather than to court.  

546.  Having a National Payment Envoy would very likely benefit mainly SMEs, but it 
is less supported by bigger SMEs and when large companies are those that mostly 
pay late.  

547. 

Introducing  national  mediation  systems  would  more  directly  lead  to  monetary 
benefits for those businesses that currently rely on court litigation, and on access to 
dispute  resolution  for  those  businesses  that  currently  avoid  going  to  courts  to 
recover  unpaid  debt.  Currently,  relatively  few  SMEs  use  mediation  (7%)  or 
arbitration  (3%)  services,  but  this  is  also  because  mediation  services  are  not 
widespread.  

548.  Should Member States specifically address the question of unfair contractual terms 
and practices through their applicable national law, time and cost saving  for the 

155 

 
 
creditor  would  translate  directly  into  a  cost  for  the  debtor  who  has  to  prove  the 
clause or practice is not unfair.  

2. 

STEP 1/4: IDENTIFICATION OF AFFECTED BUSINESSES 

549.  SMEs are within the scope of this legislative initiative and are also the intended 

main beneficiaries of this revision.  

2.1. 

LATE PAYMENTS IN SMES VS LARGE COMPANIES 

550.  Companies  from  all size classes  report  regular and/or occasional occurrences of 
late  payments  as  creditors258.  In  some  studies,  SMEs  and  large  companies  also 
report comparable levels of payment terms and payment delays.  

551.  On  the  other  hand,  SMEs  have  more  limited  access  to  liquidity  than  public 
authorities  or  large  businesses  and  getting  paid  on  time  affects  SMEs 
disproportionately compared to larger companies:  

1)  Late payments are a main challenge for 22% of large companies compared to 35% of 

SMEs in the EU.259 

2)  Late payments’ consequences are more widespread among SMEs compared with large 

companies260: 
a)  payment to suppliers (32% SMEs vs 20% large companies) 
b)  investments or new recruitment (22% SMEs vs 10% large companies) 
c)  production or operations (21% SMEs vs 10% large companies) 
d)  repayment  of  loans  /  need  for  additional  financing  (15%  SMEs  vs  10%  large 

companies) 

3)  A  2009  project  in  Poland  found  medium-sized  and  large  companies  much  more 
effective in managing their costs entailed by late payments and that they can reduce 
them to  less than 4% of total  costs, with large companies reaching  on average only 
3.3%, i.e. by over 70% less than in micro-businesses. In general, micro companies pay 
the highest cost of payment delays of their business partners, which is why they are the 
most affected by the problem. Even in small companies with 10–49 members of staff, 

258 2022 SAFE survey report “Although the differences are relatively small, problems with late payments do 
increase  with  company  size,  ranging  from  40%  for  micros  to  48%  for  large  enterprises.”  https://single-
market-economy.ec.europa.eu/access-finance/data-and-surveys-safe_en 
259 2020 Eurobarometer survey https://europa.eu/eurobarometer/surveys/detail/2244  
260 2022 SAFE survey report https://single-market-economy.ec.europa.eu/access-finance/data-and-surveys-
safe_en  

156 

 
 
 
costs of late payments are much lower and they amount to ca. 5.5% of total costs, i.e., 
by ca. 1/3 less than in micro companies (standing at 8% of their total costs)261,262. 
552.  Payment behaviour of large companies significantly differs from  that of smaller 
enterprises, as the larger the company is, the worse payment performance it is likely 
to exhibit:  

1)  On average, 51% of micro-enterprises pay their invoices by the due date, while the 
same is true for 48% of small enterprises, 42% of medium-sized enterprises and only 
35% of large enterprises. 263  

2)  A 2021264 study, covering 36 countries around the world, shows that microenterprises, 
and  in  some  markets  small  companies,  show  the  best  payment  behaviour.  The 
percentage of punctual payers decreases as business size rises.  

3)  The SME panel confirms that micro-businesses are overall the least likely to pay late 

(26%). It also finds that265: 
a)  Small  and  medium-sized  companies  are  those  less  likely  to  find  that  micro-
businesses most frequently pay late (14 and 15%), while 43% of self-employed are 
the most likely to experience delays from micros; 

b)  Small  and  medium-sized  companies  are  those  most  likely  to  find  small  and 
medium-sized companies (52-48%) and large companies (34-37%) as late payers. 

2.2. 

SMES SETTING PAYMENT TERMS 

553. 

In the SME panel, a similar percentage of SMEs asks to be paid within 30 days 
(44%) or 60 days (42%), with marked  differences by size of company, as many 
more smaller companies266 ask to be paid within 30 days. 72% of SMEs are not 

261 “Under the Portfolio of accounts receivable of Polish enterprises study the authors examined costs born 
by enterprises as a consequence of late payments. Within the framework of the study, costs of late payments 
to  enterprises  include:  (1)  losses  resulting  from  non-payment,  (2)  costs  of  interest,  (3)  costs  of  debt 
monitoring and collection, (4) costs of extensive legal procedures designed to reduce the exposure to payment 
delays, (5) costs of withdrawing from some highly risky markets.” Payment delays: their reasons, scale and 
consequences, Waldemar Rogowski 2017 ((PDF) Payment Delays: Their Reasons, Scale and Consequences 
(researchgate.net)) 
262 “The level of costs of small companies present in the study may be slightly overestimated as the study is 
based on companies using the services of the National Debt Register of Biuro Informacji Gospodarczej SA. 
While large companies automatically use this service, in the case of small companies it is possible that using 
the  services  of  economic  information  bureaus  occurs  as  a  consequence  of  negative  experiences  with 
contractors, and often only companies that have encountered problems with debt recovery on a larger scale 
explore the customer assessment path in this way” https://for.org.pl/pliki/artykuly/2628_zatoryraport.pdf  
263  D&B  2022  Payment  Study  https://www.dnb.com/en-ch/knowledge/study/payment-study-2022-
download/ 
264 Global Trade Credit Payments Study - CRIBIS & Dun & Bradstreet (dnb.co.uk)  
265 Figures are influenced by the average composition of the clientele of different sizes of companies (for 
instance, self-employed might have less frequently contracts with large companies than with micros) and by 
the relative size of creditor and debtor. 
266  83%  of  self-employed  and  50%  of  micros  ask  to  be paid within  30  days  (around  30% for  small  and 
medium), 50% of small and medium-sized companies ask to be paid within 60 days (38% for micros and 
18% for self-employed). 

157 

 
 
 
comfortable when clients require to agree to accept payment 60 days or more from 
the date of the invoice, with no significant differences by size of vendor. 

554.  Regarding  current  practices  in  setting  payment  conditions,  the  SME  panel  finds 

that: 

1)  Overall, the way most used to define payment conditions is negotiation on a case-by-
case  basis  (41%),  with  some  exceptions  for  self-employed  and  medium-sized 
companies (especially those that find micros are more frequently late payers). 

2)  30% impose specific payment conditions to the client. This is more frequent when the 
client is smaller than the vendor; the bigger the difference in size with clients that are 
found  to  be  more  frequently  bad  payers,  the  more  companies  dictate  their  own 
conditions.  The highest  effect  is  seen with  medium  sized companies imposing their 
payment conditions to micros when those are found to be more frequently late payers 
(68%). 

3)  17% of SMEs report that payment conditions are dictated by their clients. This is more 
frequent when the client is bigger than the vendor; the bigger the client is and the more 
frequently it is found to be a late payer, the more they are found to dictate payment 
conditions. The highest effect is found for medium sized companies having payment 
conditions dictated by their large clients when those are found to be more frequently 
late payers (28%). 

4)  The use of standard payment conditions is a limited practice (12% of SMEs). 

2.3.  MAGNITUDE OF LATE PAYMENT PROBLEMS IN SMES 

555.  Late  payments  are  the  second  most  critical  barrier  for  growth  and  for  the  twin 
transition of SMEs (after administrative burden), with no statistically significant 
differences between start-ups and scale-ups (whether or not they are SMEs).267  

556.  Only  3%  of  SMEs  have  all  invoices  or  turnover  paid  on  time  and  a  higher 
percentage of SMEs have more than 50% of their invoices (7%) or turnover (9%) 
paid late. The bulk of SMEs have 0-10% of their invoices (45%) or turnover (42%) 
paid late. Another important quota of SMEs have 10-25% of their invoices (30%) 
or turnover (27%) paid late. The rest of SMEs have 25-50% of their invoices (13%) 
or turnover (15%) paid late.268 

557.  Payments overdue by more than 60 days are considered the most dangerous for the 

regular performance of enterprises.269  

558.  The  recent  problems  (e.g.  COVID-19,  rising  energy  prices,  inflation  etc.)  had  a 
negative  impact  on  the  payment  behaviour  of  the  clients.  47%  of  participants 

267 2020 Eurobarometer survey https://europa.eu/eurobarometer/surveys/detail/2244  
268 SME panel report 
269  Payment  delays:  their  reasons,  scale  and  consequences,  Waldemar  Rogowski  2017  ((PDF)  Payment 
Delays: Their Reasons, Scale and Consequences (researchgate.net)) 

158 

 
 
 
noticed a deterioration (50% of small and 58% of medium-sized companies) while 
40% did not notice any change (44% of micros).270 

2.4.  WIDER IMPACT OF LATE PAYMENTS ON SMES 

559.  Late payments affects271: 

1)  the well being, generate stress and anxiety for 92% of respondents  

2)  the survival of their business (80%) 

3)  their trust in the market (79%) 

4)  the recruiting of new staff (45%) and the laying off of staff (18%) 

5)  doing more cross-border business in the EU Single Market (34%) 

560.  Micros (48%) and small companies (49%) are more affected in terms of recruiting 
new staff compared to self-employed (30%) and medium-sized companies (34%). 

561.  Dealing with late payments generates costs in terms of hours spent and monetary 
costs for informal  actions (e.g. sending  reminders, costs of registered mail, post 
stamps, making phone calls) and formal steps (e.g. recruiting a lawyer, costs of the 
lawyer, costs of court proceedings, cost of the bailiff, looking for a mediator, cost 
of a mediator attending court proceedings, looking for a debt collection company, 
costs of the debt collection company):  

1)  In terms of informal actions, the SME panel finds that one third of SMEs spent between 
20 and 99 hours and another third even more than 100 hours, and one third of SMEs 
spent  between  100  and  EUR 999  for  informal  costs  and  another  third  more  than 
EUR 1000 per year. 

2)  In terms of formal actions, the SME panel finds that 22% SMEs spent between 1 and 
19  hours,  25%  between  20  and  99  hours  and  17%  more  than  100  hours,  and  16% 
between 100 and EUR 999 for informal costs and 43% spent more than EUR 1000. 
2.5.  UNFAIR PAYMENT PRACTICES EXPERIENCED BY SMES272 

562.  The LPD introduced -but did not impose- the fairness practice of paying interests 
and the EUR 40 compensation. This practice is never used in the 80% of cases and 
rarely in 8% of cases. Interest and compensation are more frequently never paid 
when the late payer is most frequently a large (87% compared to 70% when the 
late payer is most frequently a micro-company). 

563.  Around 1 out of 4 SMEs is always or often confronted with the following unfair 

payment practices: 

270 SME panel report 
271 SME panel report 
272 SME panel report 

159 

 
 
 
1)  Clients  modify  retroactively  key  contractual  provisions  (e.g.  on  price,  quantity  or 
quality of goods/services, delivery times, etc.) in order to postpone the payment (never 
happens for 23% of SMEs).  

2)  Clients  deliberately  delay  the  acceptance  of  services  provided  and/or  of  goods 

delivered (never happens for 25% of SMEs).  

3)  Clients pay with financial products (e.g reverse factoring, "confirming") so that in order 
to  claim  payment  within the  agreed  contractual  terms,  they  have to  pay fees  and/or 
discounts (never happens for 43% of SMEs).  

564.  Deliberately contest the invoice is less used: 15% of SMEs experience it always or 
often  and  respectively  33%  and  43%  of  respondents  never  or  rarely  incurred  in 
these practices.  

565.  All these unfair payment practices are experienced by a higher quota of SMEs that 
find large companies to be most frequently late payers. When micro-enterprises are 
mostly late payers, it is much more likely that SMEs have never experienced those 
practices. 

2.6. 

SMES’ PAYMENT DELAYS DISPUTES273 

566.  Only 30% of SMEs did not have disputes related to late payment, while 8% has 
often disputes and 58% rarely. There is a clear link with the size of the company, 
as the bigger the SMEs the more likely it is to have had disputes. 

567.  On the remedies side, the most used one by far was the direct solution with the 
other business. 60% of respondents used this solution normally and 16% at least 
once; it is considered at the same time cheaper (60% of SMEs) and faster (54% of 
SMEs).  

568.  The other remedies are less used, especially by smaller SMEs:  

1)  court proceedings was never used by 38% of respondents.  

2)  mediation was never used by 52% of SMEs. 

3)  arbitration was never used by 67% of SMEs. 

569.  When asked about the last time the SME tried to resolve a late payment issue, only 
7% of SMEs replied that they preferred not to take any action at all, while 47% 
solved the issue directly with the client and 18% took the matter to court. 

2.7.  RELATIONSHIP BETWEEN E-INVOICING AND LATE PAYMENT IN SMES 

570.  The SME panel finds that, for all size classes, there are more companies that find 
e-invoicing  not  helpful  (44%  on  average)  rather  than  helpful  (31%).  This  is 
especially the case for micros (48% vs 29%). 18% of SME respondents do not use 
e-invoicing (26% of self-employed, 16% of micros and 19% of small companies). 

273 SME panel report 

160 

 
 
 
2.8.  A CLOSER LOOK AT MICROS 

571.  Late  payments  are  more  likely  to  be  a  critical  barrier  for  companies  with  less 
employees and with  lower turnover.274 Late payments  are an obstacle to  growth 
especially in micro-enterprises. 275 

572.  The SME panel tells us that micros are the least likely to pay late compared to other 
SMEs and, when they are mostly found late payers, they are most likely to never 
use unfair payment practices. 

573.  Focusing  on  companies  that  have  1-9  employees,  82%  of  micros  are  never 
automatically paid the interest and compensation and, when they are mostly found 
late  payers,  15%  of  their  SME  clients  are  often  or  rarely  paid  interest  and 
compensation (higher than other size-classes of SMEs). Only 3% of SMEs have 
invoices always paid on time. A considerable quota of micros have more than 25% 
of their invoices (21%) and their turnover (26%) paid late. 

574.  36% of micros have never had disputes with their late-payers client and 47% have 
never used courts proceedings. The last time they tried to resolve a dispute, 44% 
solved  the  issue  with  the  other  business,  14%  took  the  matter  to  court,  10% 
preferred not to take any action at all and 10% used mediation. 

575.  48% of micros agree that late payments prevent them from recruiting staff and 20% 
that they had to lay off staff because of late payments (the highest combined effect 
compared to other sizes of SMEs). 82% of micros find that late payments affect the 
survival of their business and 93% that it affects their well-being, generating stress 
and anxiety. 

2.9. 

LATE PAYMENT INTERNATIONAL ASPECTS 

576.  SMEs  in  Türkiye  (52%)  are  those  more  likely  to  find  payment  delays  as  a 
challenge. SMEs in the EU (35%) are more likely than SMEs in the US (29%), 
Canada  (24%)  or  Japan  (8%)  to  say  that  payment  delays  are  among  the  biggest 
problems their enterprise faces. 276 

577.  SME exporters are more likely to have experienced problems due to late payment 

than non-exporters (49-40%)277. 

578. 

In  the  context  of  cross-border  retail  payments,  B2B  payments  by  small  and 
medium-sized enterprises (SMEs) are smaller and less frequent compared to large 
payments by multinational corporations278. SMEs experience difficulties even for 

274 2020 Eurobarometer survey https://europa.eu/eurobarometer/surveys/detail/2244  
275  Payment  delays:  their  reasons,  scale  and  consequences,  Waldemar  Rogowski  2017  ((PDF)  Payment 
Delays: Their Reasons, Scale and Consequences (researchgate.net)) 
276 2020 Eurobarometer survey https://europa.eu/eurobarometer/surveys/detail/2244  
277 2022 SAFE survey report https://single-market-economy.ec.europa.eu/access-finance/data-and-surveys-
safe_en  
278 Bank for international settlements 2018 https://www.bis.org/cpmi/publ/d173.pdf  

161 

 
 
 
transactions  between  more  developed  regions  (e.g.  Europe  and  North  America), 
and further obstacles arise in connection with emerging market economies (EMEs), 
lower-volume “corridors” (i.e. which countries and currencies a payment can be 
made from and to) and new payees.  

579. 

In developed countries, on average, firms with fewer than 250 employees account 
for 78% of exporters but only 34% of exports; trade flows of micro firms and SMEs 
are heavily tilted toward services (accounting for 68% of total exports and 83% per 
cent of total imports). A WTO review of main obstacles to international trade for 
SMEs finds poor access to finance and slow payment mechanisms to be one of the 
four main obstacles279. 

580.  This initiative is considered highly relevant for SMEs, as it affects all EU SMEs. 

3. 

STEP 2/4: CONSULTATION OF SME STAKEHOLDERS 

3.1. 

PUBLIC CONSULTATION 

Policy option 1: Prevent late payments 

581.  The results of the PC show that 37% of respondents think that the payments terms 
should  be  capped  for  all  B2B  transactions  without  exceptions,  and  more 
specifically  at  30  days  (27%)  and  60  days  (9%),  with  no  significant  differences 
among  companies  and  business  organisations.  29%  of  the  respondents,  mostly 
business  association  (19)  and  a  minority  of  companies  (only  8),  think  that  the 
payments  terms  should  remain  unchanged.  Only  9%  (10,  business  associations 
only) think that they should be capped at 30 (6%) or 60 days (2,6%) for payments 
from large companies to SMEs only. 

582.  The other consultation activities (feedback to the call for evidence, position papers 
and bilateral meetings) showed that there is a significant majority supporting the 
capping  and  the  abolition  of  the  concept  of  “grossly  unfair”.  They  were  mostly 
business associations representing in particular SMEs (for example SMEunited and 
ESBA)  and  companies  (especially  SMEs)  but  also  some  public  authorities  and 
citizens. Generally, they support a limit of 30 days or less for payment terms B2B 
transactions. Some stakeholders -despite favouring a general capping- also favour 
certain level of flexibility when it comes to certain specific sectors or to allow an 
agreement between the creditor and the debtor under certain conditions. Most of 
them agree for an extra 30 days (60 days total), although some push for more days 
by  claiming  for  respect  to  the  “freedom  of  contract”  principle  between  its 
participants.  Only  few,  among  which  national  business  associations  or  similar 
bodies (for example, AT and DK chambers, Confcommercio from IT), are against 
establishing limits to payments of invoices.  

279 World Trade Report 2016 https://www.wto.org/english/res_e/booksp_e/world_trade_report16_e.pdf  

162 

 
 
 
583.  Overall,  the  stakeholders  support  the  proposal  to  provide  training  on  credit 
management  and financial literacy.  They were mostly  business  associations (for 
example CECOP and DK chamber of commerce). 

Policy option 2: Foster timely payments 

584.  Companies in the PC state that normally the interests are rarely (39%) or even never 
(36%) requested. The situation is even worst for the flat fee compensation, where 
(25%) rarely do it and the majority (57%) never do it. The companies participating 
to  the  PC  have  mixed  opinions  on  the  adequacy  of  the  interests  and  the 
compensation. The large majority (61%) agrees that the interest on late payment 
and  the  flat  fee  compensation  of  a  minimum  of  EUR  40  per  invoice  should  be 
applied automatically, as soon as the debtor is late with the payment. 

585. 

In the PC 67 respondents out of 117 (no differences between business organisations 
and companies) agreed on the proposal that public authorities should put in place 
mechanisms to verify that main contractors are complying with the rules on prompt 
payment  when  paying  subcontractors,  in  particular  when  a  subcontractor  is  an 
SME. 

586.  The large majority of stakeholders participating to the other consultation activities 
supported  the  proposal  to  make  the  payment  of  interests  automatic.  They  were 
mostly business associations, companies (especially SMEs which strongly support 
this  proposal)  and  some  public  authorities.  They  support  a  system  of  penalties, 
agree on adapting the flat fee compensation and that Member States should set up 
enforcement bodies. Finally they think that contracting authorities should ensure 
that subcontractors in public tenders are paid on time. This is supported by some 
Spanish business organisations and ESBA. ESBA proposes that ‘it should become 
a standard clause in public tendered contracts that the company that is awarded the 
public contract must pay their sub-contractors on the same terms that they are to be 
paid under the contract or penalties will apply’. 

587.  93%  of  the  companies  participating  to  the  PC  consider  very  useful/useful  the 
proposal  that  prompt  payment  should  be  an  additional  criterion  when  awarding 
public funding and 89 that public procurement procedures should include timely 
payment  of  suppliers  as  a  criterion.  71%  consider  very  useful/useful  that  the 
European Commission lay down minimum common criteria on prompt payment 
codes.  

Policy option 3: Better balance between large and small operators, to ensure fair payment 
conditions and empower SMEs:  

588.  All  the  proposals  of  this  option  are  in  general  supported  by  the  stakeholders 
participating  to  the  other  consultation  activities,  in  particular  by  business 
associations. They think that Member States should appoint a responsible authority 
to  monitor  compliance  and  intervene  at  the  request  of  small  businesses  or  their 
for  non-compliance 
organisations  and, 

impose  sanctions 

if  necessary, 

163 

 
 
 
 
(SMEunited). They also think that prompt payments should be an award criterion 
in public tenders (for example Sinf from SE, CEPYME from ES, CECOP). The 
proposal  to  set-up  a  National  Payment  Envoy  is  also  supported.  The  idea  to 
introduce a national mediation system received positive opinions as it is seen as a 
quick way to solve disputes (ES chambers of commerce) and because ‘alternative 
dispute  resolution  mechanisms  to  solve  payment  disputes  must  be  encouraged’ 
(Eurocommerce).  Finally,  stakeholders  (mostly  SMEs)  provided  examples  of 
unfair payment practices aimed at artificially extending the payment deadline. They 
think  that  these  practices  should  be  discouraged.  Only  in  a  couple  of  cases 
(Confcommercio  from  Italy  and  Austrian  federal  economic  chamber)  negative 
opinions were provided. 

3.2. 

SME PANEL 

589. 

In the SME panel, the vast majority of SMEs supports very strongly: 

1)  setting up enforcement bodies with the power to investigate and receive complaints, 

and to issue administrative fines for repeated bad payment behaviour (84%).  

2)  setting  a  limit  on  the  maximum  number  of  days  in  payment  terms  for  all  B2B 
transactions  (83%),  especially  SMEs  that  find  large  companies  mostly  paying  late 
(87%). Specifically, regarding the capping of payments:  

a)  highest support is  found for capping at  30 days  (36%),  with  more support from 
smaller SMEs (44%), and when large companies mostly pay late (41%), and 

b)  capping at 60 days (28%), with more support from bigger SMEs -especially small 

(36%)-, and when large companies mostly pay late (32%). 

3)  banning practices and clauses that oblige creditors to waive their rights to late payment 
interest  and  compensation  in  exchange  for  immediate  payment  (77%),  especially 
micros (80%) and SMEs that find large companies mostly paying late (80%). 

4)  transparency obligations, for large businesses only, to report regularly on their payment 
performance  (72%),  especially  SMEs  that  find  large  companies  mostly  paying  late 
(80%). 

590.  65%  of  SMEs  support  the  appointment  national  ombudspersons  for  SMEs  (or 
similar body) to bring the issue of late payments to political attention and liaise 
with businesses and governmental bodies. This action is less supported by bigger 
SMEs and when large companies mostly pay late. 

4. 

STEP 3/4: ASSESSMENT OF THE IMPACT ON SMES 

4.1. 

PREFERRED POLICY OPTION 

591.  The preferred option (PO1A, 2A, 3B) is supported by SMEs in the SME panel and 
through the PC. Overall, all sizes of SMEs can benefit from the preferred option, 
even though microenterprises should be less affected by the costs and obtain more 
benefits  compared  to  other  size  classes  (for  instance,  while  capping  is  strongly 
supported by SMEs, the 30 days capping is more favoured by microenterprises). 
As microenterprises are more affected by late payments than other sizes of SMEs, 

164 

 
 
those  expected benefits  are  more  likely  translate  into  better  performance  of 
companies with 0-9 employees. 

4.2. 

POLICY OPTION 1 - FIX THE FRAMEWORK  CONDITIONS TO 
PREVENT LATE PAYMENTS 

592.  From the SME panel we note that: 

1)  72% of SMEs are not comfortable when clients require them to agree to accept payment 

60 days or more from the date of the invoice,  

2)  only 7% of SMEs in the SME panel do not agree with a maximum payment term (12% 

of medium-sized companies), 

3)  83% of SMEs finds that setting a limit on the maximum number of days that can be 
defined in payment terms for all B2B transactions would be useful (27%) or very useful 
(56%).  

593.  Therefore, we retain that capping payment terms and therefore the deletion of the 
concept of “grossly unfair”, which are also broadly supported in other consultation 
activities, would benefit at least 3 out of 4 SMEs of all sizes. 

594.  Large enterprises are more likely to bear the costs identified in PO1, whereas SMEs 
are more likely to see the benefits. If we consider the different conditions for large 
companies and SMEs in accessing finance combined with their overall difference 
in  profitability,  overall, a  net  benefit  can  be  estimated.  The  majority  of  non-EU 
jurisdictions  that  have  adopted  prompt  payment  legislation  do  not  apply  the 
principle of “grossly unfair”. 

595.  PO1a (Capping at 30 days): In an optimistic scenario where payment times comply 
with the terms agreed, reduction of 22.6 days of actual payment duration, or nearly 
43%;  in  a  more  realistic  scenario  of  proportionally  reduced  payment  times, 
reduction of 12.4 days or 23.5%. We can estimate that around 41% of SMEs on 
average will particularly benefit from capping at 30 days, with broader effects on 
micros  (50%)280.  In  addition,  the  effects  on  negotiation  should  benefit  at  least 
around 33% of SMEs, from different points of view [list the points of view and the 
origin of 33% does not show in the footnote]281. 

596.  PO1b (Capping at 60 days): It would target long payment terms. Currently 14.4% 
of all companies specify payment terms above 60 days (consistent also with 14.5% 
in  the  SME  panel).  The  JRC  study  on  the  economic  impact  of  faster  payments 

280 According to the SME panel, the quota of SMEs that are not against the capping of payment terms and 
that support a 30 days capping is 37% (44% of micros, 31% of small and 27% of medium-sized companies); 
the quota of SMEs that ask for payments within 30 days is 44% (56% of micros, 32% of small and 30% of 
medium-sized companies) -we assume that this is the payment term they are comfortable with-. The estimate 
is the average between the two. 
281 “43% of companies have experienced a problem caused by a lack of competition when carrying out their 
business: the most common specific difficulties experienced are high prices and powerful suppliers being 
able to impose unfair selling conditions (both 57%).” Eurobarometer “SMEs' expectations for an effective 
competition policy” of October 2022 

165 

 
 
 
suggests  a  10%  increase  in  cash  flow  for  those  companies  who  currently  set 
payment terms above 60 days.  

597.  We estimate that 35% of SMEs on average will particularly benefit from capping 
at 60 days, with broader effects on small and medium-sized companies (43%).282  

598.  PO1c (Capping at  60 days where the creditor is  an SME): benefits  will affect  a 
smaller subset of invoices, estimated at 66% of all invoices issued by 14.4% of all 
companies.  

599.  PO1a  and  PO1c  also  contain  the  capping  of  the  verification  or  acceptance 
procedure  at  30  days,  without  exception.  According  to  the  SME  panel,  this 
additional capping would likely benefit between 25% and 66% of SMEs (22-58% 
for micros, and 27-74% of small and medium-sized companies).283 

600.  MS facilitate availability and access of SMEs to credit management tools, financial 
literacy training and foster the use by SMEs of digital tools for timely payments: 
access to credit management and financial literacy trainings can provide a direct 
benefit  to  SMEs  and  it  has  found  near-universal  support  in  the  stakeholder 
consultation. 

4.3. 

POLICY OPTION 2: FOSTER TIMELY PAYMENT 

601.  Making  payment  of  interests  automatic  (eliminate  the  concept  of  “entitlement”) 
and clarify the “dies ad quem” and making payment of the flat fee compensation 
automatic:  increased  compensation  fees  and  automatic  payment  of  interest  rates 
will bring significant benefits to creditors who are paid late and, without changes 
in  payment  behaviour,  a  direct  cost  to  debtors  who  pay  the  interest  and 
compensation fees. SMEs will have to pay interest and compensation fees if they 
pay late. If SMEs find it difficult to enforce interest from larger market players and 
must  pay  interest  for  paying  late  themselves,  they  may  be  more  affected  by  the 
automatic interest and compensation than large businesses. 

602.  54%  of  companies  say  they  never  ask  for  interest,  and  a  further  26%  only 
sometimes ask for the compensation.284 80% of SMEs never receive automatically 
interest or compensation, 8.5% rarely and only 1% often.285 Annex 4 estimates that 
in 66% of invoices the creditor in an SME (43% micros, 13% small 10% medium) 
while in 34% of invoices the creditor is a large company. Only 4% of SMEs have 

282 According to the SME panel, the quota of SMEs that are not against the capping of payment terms and 
that supports a 60 days capping is 28% (18% of micros, 37% of small and 31% of medium-sized companies); 
the quota of SMEs that ask for payments within 60 days is 42% (33% of micros, 49% of small and 53% of 
medium-sized companies) -we assume that this is the payment term they are comfortable with-. The estimate 
is the average between the two. 
283 In the SME panel, 66% of SMEs encountered at least once clients that deliberately delay the acceptance 
of  services  provided  and/or  of  goods  delivered,  with  25%  of  SMEs  encountering  this  practice  always  or 
often. 
284 EPR 2022 
285 SME panel 

166 

 
 
 
all their invoices paid on time, while 94% have invoices paid late.286 Even under 
automatic  payment,  it  would  be  unrealistic  to  assume  100%  of  interest  is  being 
successfully paid out. Companies may still not seek redress if their debtor does not 
pay interest or compensation fees287. 77% of SMEs supported banning practices 
and clauses that oblige creditors to waive their rights to late payment interest and 
compensation in exchange for immediate payment. It is difficult to estimate what 
percentage  of  SMEs  would  benefit  from  this  option,  but  while  it  will  benefit 
creditors of all sizes, (without changes in payment behaviour) its costs could affect 
more the companies that are more likely to be late payers (large, but also small and 
medium  companies).  To  be  noted  that  several  non-EU  jurisdictions  that  have 
adopted prompt payment legislation apply automatic interest (see Annex 18). 

603.  PO2a  (enforcement  bodies  empowered  to  issue  administrative  sanctions  and 
publish  the  name  of  offenders):  In  France  it  has  been  estimated  that,  since  the 
introduction of the enforcement body, average payment delays have been reduced 
by 17.8%. This option would mostly benefit companies that are more frequently 
paid  late.  We  cannot  find  a  clear  correlation  with  the  size  of  the  SME;  small 
companies seem to be those whose invoices are most likely to be paid late288 and 
at the same time small and medium-sized companies are those more likely to be 
found late payers by SMEs. Potential fines  to firms  paying  late  are  estimated at 
EUR 136.8 million per year. Given that the likelihood of paying late increases with 
the size of the company, especially micros should be less affected by this option in 
terms of costs.  

604.  PO2b (enforcement bodies responsible for monitoring implementation): compared 
to  PO2a, this  option will reduce benefits  for businesses that  are paid  late  as  the 
deterrent  effect  is  much lower here than in  PO2a, but  will also  lower additional 
costs for late payers (mainly large companies and small and medium companies). 

605.  PO2 also includes: 

1)  Ensuring  that  subcontractors  in  public  tenders  are  paid  promptly:  this  option  is 
supported by 57% of stakeholders, including business associations and direct responses 
from businesses. Contractors of above EU thresholds works contracts will have to show 
that  they  have  paid  their  own  subcontractors  on  time;  73%  of  those  contractors  are 
estimated to be SMEs, accounting for 26% of aggregated value (which shifts to 51% if 
awards  above  EUR 100  million  are  excluded).289  In  general,  as  the  contract  value 

286 In the SME panel, among those SMEs that are not opposed to banning practices and clauses that oblige 
creditors to waive their rights to late payment interest and compensation in exchange for immediate payment, 
only 6% of micros, 1% of small and 3% of medium-sized companies have all their invoices payed on time. 
287 Currently, 7% of SMEs preferred not to take any action at all the last time they had to solve a late payment 
issue. 
288  98%  of  small  companies  have  invoices  paid  late,  against  91%  of  micros  and  95%  of  medium-sized 
companies. 
289 The proportion of above-threshold public procurement contracts awarded to SMEs in the EU28 in the 
2011-2017 for above-threshold works is estimated at 73% (with a high share -32%- to small enterprises) for 

167 

 
 
 
 
increases, the share won by SMEs decreases.290 Enterprises in the construction industry 
are generally engaged in a subcontracting relationship to a relatively high share (45%) 
compared to  other sectors (26%  as main  contractors and 28% as subcontractors).291 
Therefore, while 73% of companies that fall into the scope of this option are likely 
SMEs, we estimate that only 20% of SMEs that are main contractors would likely bear 
its costs. On the benefits’ side, 49% of aggregated value of these public contracts goes 
to  SMEs.  To  be  noted  that  rules  exist  or  are  being  introduced  in  other  non-EU 
jurisdictions to specifically improve the timing of payments in the supply chain of the 
construction  sector,  especially  for  public  contracts  -  with  the  objective  of  also 
decreasing the overall cost of public works for the tax-payer (see also Annex 18). 
2)  Adapting the compensation fee: Some standard one-off adjustment cost will fall on all 
businesses with a total cost of EUR 243 million for the EU-27. There are no specific 
considerations  linked  to  the  size  of  the  business  in  terms  of  costs.  Benefits  will  be 
mostly felt by the same companies identified for PO2a and PO2b. 

4.4. 

POLICY  OPTION  3:  EMPOWERING  SMES  AND  ENSURING 
MORE FAIRNESS IN BUSINESS TRANSACTIONS 

606.  The main benefits to businesses for PO3 come from reduced enforcement costs to 
chase  late  payments,  which  are  estimated  between  5  and  10%  of  total 
administrative work for an SME. It is difficult to quantify how much of this is down 
to  litigation  costs  in  the  courts.  The  measures  under  this  Policy  Option  are 
particularly targeted at SMEs. It is usually SMEs that avoid going to court, for lack 
of  financial  means  or  fear  of  jeopardising  business  relationships,  and  SMEs  are 
therefore  most  likely  to  benefit  from  mediation  services  or  a  national  payment 
envoy. 

607.  PO3 will provide the smallest direct reduction of payment delays, as it targets only 
those payments that are already late and focuses on helping the creditors recover 
their debts. The costs to businesses under this option are relatively limited, as all 

an overall aggregated value of 26% (13% to small enterprises). Although micro-enterprises would normally 
have insufficient resources to act as general contractors for above-threshold public works, they still have the 
opportunity to win parts of the construction when the contract has been broken down into lots. For contracts 
-not limited to works- above EU thresholds, the total direct and indirect participation of SMEs in terms of 
aggregated  value  was  estimated  to  be  49% for  the  EU-28 (Analysis  of  the  SMEs'  participation  in public 
procurement and the measures to support it, 2019) 
290 The distribution of works contracts has itself two peaks: the first is at around EUR 500 000, and is to a 
large extent covering CANs that were broken down into lots, and the second is at EUR 5 million, dominated 
by contracts with no subdivision into lots. SMEs begin to become considerably disadvantaged with a contract 
value of around EUR 1 million for public works. Once the contract value becomes larger, on average main 
contractors are less likely to employ SMEs, regardless of their role as partner, subcontractor, or supplier. 
(Analysis of the SMEs' participation in public procurement and the measures to support it, 2019) 
291 The construction industry is dominated by a large number of small companies that provide subcontracting 
services  to  their  larger  counterparts  (Edum-Fotwe  and  McCaffer,  1999);  45%  of  the  micro  firms  in  the 
construction sector are engaged in any subcontracting relation and about 51% of both small and medium-
sized  enterprises.  It  has  been  estimated  that  26%  of  construction  companies  are  main  contractors  in  a 
subcontracting relationship and 28% are subcontractors (with an overlap between the two). (Report on EU 
SMEs and subcontracting, 2009) 

168 

 
 
 
parties  benefit  from  mediation  services  and  clear  definitions  of  unfair  practices; 
even debtors will have reduced costs if cases go to a mediation system rather than 
to court.  

608.  PO3a (National Payment Envoy): the intervention of a Payment Envoy could lead 
to around EUR 2.6 million in recovered debt across the EU-27. It would very likely 
benefit  mainly  SMEs;  it  is  supported  by  65%  of  SMEs  in  the  SME  panel  (less 
supported by bigger SMEs and when large companies are those that mostly pay 
late). 

609.  PO3b  (national  mediation  system):  this  option  would  more  directly  lead  to 
monetary benefits for those businesses that currently rely on court litigation, and 
on access to dispute resolution for those businesses that currently avoid going to 
courts to recover unpaid debt. This Policy Option might lead to a total reduction of 
payment delays by 5.5%. Total enforcement cost savings could amount to nearly 
EUR 27 million (taking into account a 70% success rate). Currently, relatively few 
SMEs use mediation or arbitration services (in the SME Panel, only 7.4% of SMEs 
stated  they  used  mediation  the  last  time  they  were  paid  late,  and  only  3%  used 
arbitration), but this is largely because mediation services are not widespread. A 
national system of mediation is likely to make it more accessible to SMEs. To be 
noted  that  several  non-EU  jurisdictions  have  introduced  or  are  considering 
introducing  prompt  payment  legislation  for  the  construction  sector  that  includes 
arbitration (see Annex 18). 

610.  PO3  also  includes  an  option,  which  is  beneficial  for  SMEs,  to  request  Member 
States to specifically address the question of unfair contractual terms and practices 
through their applicable national law. Time and cost saving for the creditor would 
translate directly into a cost for the debtor who has to prove the clause or practice 
is not unfair.  

5. 

STEP 4/4: MINIMISING NEGATIVE IMPACTS ON SMES 

611.  Policy options in this proposal have been designed with SMEs in mind. 

169 

 
 
 
 
P.  ANNEX 16: RESULTS OF THE SME PANEL CONSULTATION ON 

THE REVISION OF THE LATE PAYMENT DIRECTIVE 

1. 

BACKGROUND 

612.  This  SME Panel  consultation  is  part of the European Commission’s preparatory 
work for the revision of the Late Payment Directive (2011/7/EU)292, planned for 
adoption in Q3 2023. 

613.  SMEs are one of the main  stakeholders of this initiative as they are particularly 
affected  by  late  payments.  That  is  why  it  was  important  for  the  Commission 
services to gather information about SMEs’ views on the revision of the Directive. 

614.  This  consultation  aimed  to  collect  information  on  the  following  aspects  of  late 

payments: 

1)  the main features of payment terms used by businesses; 
2)  businesses’ experience of unfair payment practices; 
3)  businesses’ handling of disputes about payment delays; 
4)  businesses’ views on possible policy measures to combat late payments. 

615.  This  consultation  was  targeted  at  small  and  medium-sized  enterprises  (SMEs) 
active  in  any  sector  of  the  economy.  It  focused  only  on  payment  conditions  for 
business-to-business (B2B) transactions.  

2. 

SHORT SUMMARY OF THE RESULTS OF THE SURVEY 

2.1.  OVERVIEW OF RESPONDENTS 

616. 

In total, 939 SMEs replied to this consultation in the EU Survey webpage.  

617. 

In terms of their size, 40% were micro companies with 1 to 9 employees (378 out 
of  939),  37%  small  companies  with  10  to  49  employees  (347),  14%  medium 
companies with 50 to 249 employees (128) and 9% self-employed (86).  

292 https://single-market-economy.ec.europa.eu/smes/sme-strategy/late-payment-directive_en 

170 

 
 
 
1. What is the size of your business?
Single person 
business/self-
employed 9,2%

Business with 
50 to 249 
employees
13,6%

Business with 
10 to 49 
employees
37,0%

Business with 1 
to 9 employees
40,3%

618.  The SME Panel was publicised by the Enterprise Europe Network. SMEs from the 
European  countries  participating  to  the  Network  could  participate293.  Most 
responses came from Spain (457), Italy (182), Poland (110), followed by Romania 
(48), Portugal (43), France (27), Austria (19) and Hungary (10). There were a few 
replies  from  Belgium,  Bulgaria,  Czechia,  Denmark,  Germany,  Greece,  Latvia, 
Lithuania  and  Finland  and  a  couple  or  individual  responses  from  some  other 
countries (Estonia, Ireland and Norway).  

619.  The  most  represented  sector  of  activity  was  manufacturing  (246  out  of  939) 
followed by construction (174), other services activities (147), wholesale and retail 
trade (96). professional, scientific and technical activities (71), 

620.  45%  of  the  respondents  (420  out  of  939)  stated  that  small  and  medium-sized 
companies are the ones  which pay mostly late (with a higher prevalence among 
small and medium-sized businesses – around 50%).  

621.  30 % (279) pointed out that, among their clients, large companies are those that 
mostly pay late (with increasing prevalence as the size of the creditor increases – 
from around 21% self-employed to around 37% medium-sized companies).  

622.  26% (240) found that micros mostly pay late (with the highest prevalence among 

self-employed around 43%).  

2.2. 

POLICY MEASURES TO COMBAT LATE PAYMENTS 

623.  The  respondents  were  asked  to  indicate  how  useful  could  be  some  options  for 
policy measures to be proposed in the context of a possible revision of the EU rules 

293 This included the 27 EU member states, UK, Iceland, Liechtenstein, Norway, Switzerland, Montenegro, 
North Macedonia, Albania, Serbia, Türkiye, Bosnia and Herzegovina, Ukraine and Moldova.  

171 

 
 
 
 
on combating late payments. All of them obtained a majority of positive and very 
positive opinions. In particular:  

1)  84%  of  SMEs  (789  out  of  939)  supported  the  stronger  enforcement  of  rules  (EU 
countries should set up enforcement bodies with the power to investigate and receive 
complaints, and to issue administrative fines for repeated bad payment behaviour). For 
this action, no significant difference is found by size of companies or by size of debtor 
that mostly pay late. 

2)  83% of SMEs (777) supported setting a limit on the maximum number of days that can 
be defined in payment terms for all B2B transactions. For this action, no significant 
difference  is  found  by  size  of  companies,  while  it  is  most  popular  when  large 
companies mostly pay late (around 87%). 

3)  77% of SMEs (724) supported banning practices and clauses that oblige creditors to 
waive their rights to late payment interest and compensation in exchange for immediate 
payment.  This  action  is  most  supported  by  micros  (around  80%),  and  when  large 
companies mostly pay late (around 80%). 

4)  72% of SMEs (672) supported transparency obligations, for large businesses only, to 
report regularly on their payment performance. This action is less supported by self-
employed (around 65%), while it is most popular when large companies mostly pay 
late (around 80%). 

5)  65% of SMEs (612) supported the appointment national ombudspersons for SMEs (or 
similar body) to bring the issue of late payments to political attention, and liaise with 
businesses and governmental bodies. This action is less supported by bigger SMEs and 
when large companies mostly pay late. 

5. Possible options for the revision of the lat payment directive 
ranked by % of participants who replied "very useful" and 
"useful"

EU countries should set up enforcement bodies with the
power to investigate and receive complaints, and to issue
administrative fines for repeated bad payment behaviour

Setting a limit on the maximum number of days that can
be defined in payment terms for all B2B transactions

Banning practices and clauses that oblige creditors to
waive their rights to late payment interest and
compensation in exchange for immediate payment

Transparency obligations, for large businesses only,to
report regularly on their payment performance

EU countries should appoint a national ombudsperson for
SMEs (or similar body) to bring the issue of late payments
to political attention, and liaise with businesses and…

84,0%

82,7%

77,1%

71,6%

65,2%

0%

20%

40%

60%

80%

100%

624.  Specifically, regarding the capping of payments:  

1)  36% of SMEs (341) supported capping at 30 days (with more support from smaller 
SMEs – around 44%, and when large companies mostly pay late – around 41%) 

172 

 
 
 
 
2)  17%  of  SMEs  (158)  supported  capping  at  45  days  (very  low  support  from  self-

employed – around 8%) 

3)  28%  of  SMEs  (261)  supported  capping  at  60  days  (with  more  support  from  bigger 
SMEs, especially small – around 36%, and when large companies mostly pay late – 
around 32%) 

4)  8%  (70)  did  not  agree  with  a  maximum  payment  term  (with  more  support  from 

medium-sized -around 12%) 

5)  12%  (109)  would  favour  exceptions  for  certain  sectors  due  to  the  specificity  of  the 
supply chain or of the market (with more support when micros mostly pay late – around 
21%) 

6. Should a maximum payment term in B2B be set at:

Exceptions for 
certain sectors 
11,6%

No maximum 
payment term
7,5%

60 days 
27,8%

30 days 
36,3%

45 days 
16,8%

625.  On e-invoicing, there was no broad agreement on its effectiveness towards prompt 
payment. For all size classes, there were more companies that find e-invoicing not 
helpful rather than helpful. In detail, 44% (415) stated that e-invoicing did not help, 
31% of respondents (291) said that e-invoicing helped them to receive payments 
on time, 18% (168) did not use this facility and 7% (65) did not know.  

2.3.  WIDER IMPACT OF LATE PAYMENTS 

626.  Almost all respondents (92% or 861 out of 939) strongly agreed or agreed that late 
payments  have  an  important  impact  on  the  well  being  of  the  entrepreneurs  and 
generate stress and anxiety and 80% (754) that this heavily affects the survival of 
their business.  

627.  79%  strongly  agree  or  agreed  (737)  that  late  payments  affect  their  trust  in  the 
market. 45% (421) said that because late payment they did not recruit new staff and 
33,9% (318) did not do cross-border business in the EU Single Market because late 
payment. The impact on becoming more digital (284 out of 939) or green (260) is 
apparently lower as well as on laying off staff (only 164 strongly agreed or agreed).  

173 

 
 
 
8. Statements on late payment effects ranked by % of participants 
who stronlgy agree or agree with them

Late payments affect my well being, generate stress and
anxiety

Late payments affect the survival of my business

Late payments affect my trust in the market

91,7%

80,3%

78,5%

Late payments prevent me from recruiting staff

44,8%

Late payments prevent me from doing more cross-border
business in the EU Single Market
Late payments prevent my business from becoming more
digital
Late payments prevent my business from becoming more
green

33,9%

30,2%

27,7%

I had to lay off staff because of late payments

17,5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2.4. 

SETTING PAYMENT TERMS 

628.  41% (383 out of 939) of respondents reported that they negotiate payment terms 
case by case and this is most frequent among small companies (47%). 30% (283) 
stated  that  they  have  their  owns  specific  payment  conditions  and  this  is  most 
frequent among self-employed (44%) and medium-sized companies (34%). 17% 
(160) affirmed that payment conditions are dictated by their clients and this is most 
frequent among micros (19%), while less the case for self-employed. 12% (113) 
said that in their sector payment conditions are standard and they follow them. This 
is  relatively  more  frequent  among  self-employed  (14%)  and  medium-sized 
companies (14%).  

629.  According to size of client that is found to mostly pay late, the average distribution 

for SMEs is the following: 

1)  When clients that mostly pay late are micros: 

a)  41% of SMEs have their own specific payment conditions and ask clients to adhere 

to them 

b)  38% of SMEs negotiate payment conditions on a case-by-case basis 

c)  11% of SMEs state that in their sector payment conditions are standard and they 

adhere to them 

d)  10% of SMEs state that payment conditions are dictated by their clients. 

2)  When clients that mostly pay late are small and medium-sized companies: 

a)  43% of SMEs negotiate payment conditions on a case-by-case basis 

b)  29% of SMEs have their own specific payment conditions and ask clients to adhere 

to them 

c)  16% of SMEs state that payment conditions are dictated by their clients. 

174 

 
 
 
d)  12% of SMEs state that in their sector payment conditions are standard and they 

adhere to them 

3)  When clients that mostly pay late are large companies: 

a)  39% of SMEs negotiate payment conditions on a case-by-case basis 

b)  24% of SMEs have their own specific payment conditions and ask clients to adhere 

to them 

c)  24% of SMEs state that payment conditions are dictated by their clients. 

d)  14% of SMEs state that in their sector payment conditions are standard and they 

adhere to them 

630.  Looking at differences by size of vendor: 

1)  Micros:  

a)  Large companies are most frequently late payers: 36% of micros negotiate payment 
conditions on a case-by-case basis and 26% have payment conditions dictated by 
clients. 

b)  SMEs are most frequently late payers: 41% of micros negotiate payment conditions 
on a case-by-case basis  and 30% ask clients  to  adhere to  their specific payment 
conditions. 

c)  Micros  are  most  frequently  late  payers:  41%  of  micros  negotiate  payment 
conditions on a case-by-case basis and 35% ask clients to adhere to their specific 
payment conditions 

2)  Small companies:  

a)  Large  companies  are  most  frequently  late  payers:  42%  of  companies  negotiate 
payment  conditions  on  a  case-by-case  basis,  26%  ask  clients  to  adhere  to  their 
specific payment conditions and 22% have payment conditions dictated by clients. 

b)  SMEs  are  most  frequently  late  payers:  49%  of  companies  negotiate  payment 
conditions on a case-by-case basis and 25% ask clients to adhere to their specific 
payment conditions. 

c)  Micros  are  most  frequently  late  payers:  47%  of  companies  negotiate  payment 
conditions on a case-by-case basis and 35% ask clients to adhere to their specific 
payment conditions 

3)  Medium companies:  

a)  Large  companies  are  most  frequently  late  payers:  38%  of  companies  negotiate 
payment conditions on a case-by-case basis, 28% have payment conditions dictated 
by clients and 21% ask clients to adhere to their specific payment conditions. 

b)  SMEs  are  most  frequently  late  payers:  39%  of  companies  negotiate  payment 
conditions on a case-by-case basis and 32% ask clients to adhere to their specific 
payment conditions. 

c)  Micros are most frequently late payers: 68% of companies ask clients to adhere to 
their specific payment conditions and 16% negotiate payment conditions on a case-
by-case basis and  

175 

 
 
631. 

In general respondents ask for payments within 30 days of the date of the invoice 
(44% or 411) or within 30 to 60 days (42% or 392). There are differences by size 
of company as 83% of self-employed and 50% of micros ask to be paid within 30 
days  (around  30%  for  small  and  medium)  and  50%  of  small  and  medium-sized 
companies  ask  to  be  paid  within  60  days  (38%  for  micros  and  18%  for  self-
employed). 

632.  Only a small minority asks payments within 60 and 90 days or after 90 days (12% 
or 116 and 2% or 20 respectively). There are small differences as up to 18% for 
small companies ask to be paid within 60 and 90 days and up to 4% medium-sized 
companies ask to be paid after 90 days. 

10. Which of the following situations best represents 
your current practice?

We ask for 
payments within 
30 to 60 days of 
the date of the 
invoice; 41,7%

We ask for 
payments within 
30 days of the 
date of the 
invoice; 43,8%

We ask for 
payments within 
60 to 90 days of 
the date of the 
invoice; 12,4%

We ask for 
payments after 
90 days of the 
date of the 
invoice; 2,1%

633.  Also, a large majority (679 out of 939, 72%) is not comfortable when the clients 
require  them  to  agree  to  accept  payment  60  days  or  more  from  the  date  of  the 
invoice, with no differences among size classes. 

634.  Among the reasons for accepting longer payment terms SMEs mostly mentioned 
the need to retain a client (562), to secure new clients (326) or to safeguard the 
market position (308) and when there is no other choice (307).  

176 

 
 
 
12. What are the reasons for accepting payment terms longer than those 
that you are comfortable with? Multiple replies possible

To retain a client

To secure new clients

To safeguard our market position in the face of competition

There is no other choice

To secure larger orders

To enter new markets

To secure more profitable orders

When our order book is low, and we absolutely need to get…

326

308

307

240

164

148

134

562

Other

0

74

100

200

300

400

500

600

2.5. 

THE SCALE OF LATE PAYMENT PROBLEM 

635.  Dealing with late payments generates costs in terms of hours spent  for informal 
actions  (e.g.  sending  reminders,  making  phone  calls)  and  formal  steps  (e.g. 
recruiting  a  lawyer,  attending  court  proceedings,  looking  for  a  debt  collection 
company, looking for a mediator). 24% (230 out of 939) SMEs declared between 
1 and 19 hours spent for informal actions in relation to late payment, 32% (302) 
between  20  and  99  hours  and  31%  (290)  even  more  than  100  hours.  Similar 
situation for the formal  actions: 22%  (204)  spent  between 1  and 19 hours,  25% 
(236) between 20 and 99 hours and 17% (157) more than 100 hours.  

13.1 - Please estimate the hassle costs you bear each 
year in relation to late payment in hours spent

40%

30%

20%

10%

0%

0/no reply

1-19 hours

20-99 hours

100 hours and
more

Hours Informal costs

Hours Formal costs

636.  Late payments generate also monetary costs, informal (e.g. costs of registered mail, 
post stamps, cost of phone calls) and formal (e.g. costs of the lawyer, costs of court 
proceedings,  cost  of  the  bailiff,  costs  of  the  debt  collection  company,  cost  of  a 
mediator).  In this case only  10% (93 out  of 939) of respondents  spent  less  than 
EUR 100 per year for informal costs and 2% (17) less than  EUR 100 for formal 
costs. 34% (320) spent between 100 and EUR 999 for informal costs and 16% (148) 

177 

 
 
 
 
for formal costs. Finally, 31% (293) and 43% (403) spent more than EUR 1000 per 
year respectively for informal and formal costs.  

13.2- Please estimate the hassle costs you bear each year 
in relation to late payment in monetary costs. 

50%

40%

30%

20%

10%

0%

0/no reply

1-99

100-999

1000 and more

Monetary costs - Informal costs

Monetary costs Formal costs

637.  The number of invoices sent to the clients which are paid late are quite significant 
as only 32 respondents stated that no invoices were paid late. The majority of SMEs 
(45% or 425 out of 939) declared that between 1 and 10% of their invoices are paid 
late, 272 (29%) replied that between 10 and 25% of the invoices are paid late, 120 
(13%) declared between 25% and 50% and 66 (7%) reported that more than 50% 
of their invoices are not paid on time.  

638.  63% of self-employed replied that the quota of invoices paid late is limited to 25% 

of invoices sent, while this happens for 79% of small companies. 

14. Please indicate the percentage of invoices sent to your clients 
that are paid late (i.e. the number of individual invoices paid after 
the agreed deadline).

More than 50% of 
your invoices
7,0%

Not 
applicable
2,6%

0% of your invoices
3,4%

25% - 50% of your 
invoices
12,8%

10% - 25% of your 
invoices
29,0%

1% - 10% of your 
invoices
45,3%

178 

 
 
 
 
 
 
639.  This is reflected by the replies concerning the turnover. Only 31 respondents (3%) 
stated  that  their  business  turnover  was  not  affected  by  the  late  payment  of  the 
invoices. 395 respondents (42%) replied that 1 to 10% of the turnover was affected, 
255 (27%) between 10 and 25%, 145 (15%) between 25% and 50% and 84 (9%) 
more than 50%. No significant differences are found by size of company. 

15. Please indicate the percentage of your business' turnover (in 
the value of invoices) that your clients pay after the agreed 
deadline.

More than 50% of 
your turnover
8,9%

Not applicable
3,1%

0% of your turnover
3,3%

25% - 50% of your 
turnover
15,4%

10% - 25% your 
turnover
27,2%

1% - 10% of your 
turnover
42,1%

640.  The  recent  problems  (e.g.  COVID-19,  rising  energy  prices,  inflation  etc.)  had  a 
negative impact on the payment behaviour of the clients. 47% (440) of participants 
noticed a deterioration (50% of small and 58% of medium-sized companies) while 
40% (372) did not notice any change (44% of micros). 

2.6.  UNFAIR PAYMENT PRACTICES 

641.  The  most  reported  unfair  practice  is  to  “modify  retroactively  key  contractual 
provisions (e.g., on price, quantity or quality of goods/services, delivery times, etc.) 
in  order  to  postpone  the  payment”  as  68%  (640  out  of  939)  of  respondents 
experienced it at least once and only 23% (220) never experienced it. This practice 
is  experienced  often  when  the  late  payer  is  most  frequently  a  large  (26%)  or 
medium/small company (25%) compared to micros (18%).  

642.  43% (400) of SMEs replied that their clients never “pay with financial products 
(e.g reverse factoring, "confirming") so that in order to claim payment within the 
agreed contractual terms, they have to pay fees and/or discounts” (45% of SMEs 
experienced  it  at  least  once).  When  micros  are  most  frequently  late  payers,  this 
practice is never experienced by 54% of SMEs (against 33% when the late payer is 
most frequently a large company). 

643.  Another used unfair practice is  to  “deliberately delay the acceptance of services 
provided and/or of goods delivered to postpone payment” (66% of respondent, 622, 
encountered it at least once). Small and medium-sized companies are those more 
likely to have experienced it at least once (74%). This practice is experienced more 

179 

 
 
 
 
often when the late payer is most frequently a large company (36%). On average 
25%  (235)  of  the  respondents  never  experiences  this  practice  and  31%  of  them 
never experienced it when the late payer is most frequently a micro-company. 

644. 

“Deliberately contest the invoice” is less used as respectively 33% (315) and 43% 
(406)  of  respondents  never  or  rarely  incurred  in  this  practice  (58%  or  547 
experienced it at least once). Medium-sized companies are those more likely to be 
often confronted with the contestation of the invoice (18% compared to 13% of the 
SME  average).  This  practice  is  experienced  often  when  the  late  payer  is  most 
frequently a large company (20%). 

645.  The  interests  and  the  EUR 40  compensation  are  never  paid  automatically  in  the 
80% of cases (754 out of 939) and rarely in 8% of cases (79). 15% of medium-
sized companies replied that they rarely receive interest and compensation. Interest 
and  compensation  are  more  frequently  never  paid  when  the  late  payer  is  most 
frequently a large company (87% compared to 70% when the late payer is most 
frequently a micro-company). 

17. Please indicate whether you have experienced one of the following situations 
and if so, how often

Our clients pay with financial products so we have to pay
fees and/or discounts

Our clients automatically pay both interest and the 40 EUR
compensation for late payment

Our clients deliberately contest the invoice to postpone
payment

Our clients deliberately delay the acceptance of services
provided and/or of goods delivered, to postpone payment

Our clients seek to modify retroactively key contractual
provisions in order to postpone the payment

l

A
O
w
f
Rarely
t
a
e
y
n
s

O
f
t
e
n

l

A
w
a
y
s

l

A
w
a
y
s

O
f
t
e
n

O
f
t
e
n

O
f
t
e
n

Rarely

Never

NA/Don't know

Never

NA/Don't know

Rarely

Never

NA/Don't know

Rarely

Never

NA/Don't know

Rarely

Never

NA/Don't know

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2.7.  DISPUTE ABOUT PAYMENT DELAYS 

646.  Only  30%  (278  out  of  939)  of  respondents  did  not  have  disputes  related  to  late 
payment while 66% (621) had at least one (58% or 547 rarely and 8% or 74 often). 
The  bigger  the  SMEs  the  more  likely  it  is  to  have  had  disputes;  medium-sized 
companies are more likely to often have disputes (13%), while self-employed and 
micros are more likely to have never had disputes (47% and 36%). 

647. 

In the last two years 46% (430) respondents had between 1 and 9 disputes, 11% 
(102) between 10 and 49 disputes and 39% (369) had no disputes.  

180 

 
 
 
19. Have you had disputes with other 
businesses because they did not pay 
you on time?

Do not 
know
4,3%

Yes, often
7,9%

Never
29,6%

20. Could you please indicate the 
approximate number of disputes you have 
had with other businesses because they did 
not pay you on time in the last 2 years.

50 and 
more
2,3%

No reply
1,7%

10-49
10,9%

0/never
39,3%

Yes, rarely
58,3%

1-9
45,8%

648.  On the remedies side, the most used one by far was the direct solution with the 
other  business.  60%  of  respondents  (563)  used  this  solution  normally  and  16% 
(150) at least once.  

649.  This solution was considered at the same time cheaper (60% or 568 of SMEs) and 

faster (54% or 509 of SMEs).  

650.  The other remedies are not used so often as court proceedings was never used by 
38% of respondents (354). The smaller the company, the less this remedy is used: 
60% of self-employed, 47% of micros, 28% of small and 20% of medium-seized 
companies never used it. 

651.  Mediation was never used by 52% of SMEs (487) and arbitration by 67% (631). 

652.  All remedies are more frequently used by larger SMEs. 

653.  When asked about the last time the SME tried to resolve a late payment issue, only 
7% of SMEs (68) replied that they preferred not to take any action at all (but only 
2% of medium-sized companies), while 47% (442) solved the issue directly with 
the client and 18% (170) took the matter to court. 

181 

 
 
 
 
 
 
21. How often did you use one of the following remedies to solve the payment 
dispute with your debtor?

Direct resolution with the other business

Always

Often

Rarely

NA/Don't know

Never

Arbitration

Always

Often

Rarely

Never

NA/Don't know

Mediation

Always

Often

Rarely

Never

NA/Don't know

Court proceedings

Always

Often

Rarely

Never

NA/Don't know

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

22.a What were the main motivations for your choice of dispute 
resolution remedy?

70%

60%

50%

40%

30%

20%

10%

0%

Court
proceedings

Arbitration

Mediation

Procedure is faster

Procedure is cheaper

No Answer

Direct
resolution with
the other
business

182 

 
 
 
 
 
 
 
Q.  ANNEX 17:   MAPPING LATE PAYMENT IN THE EU  

1. 

LATE PAYMENT DELAYS IN DAYS 

Figure 6: Payment terms and actual payment duration as creditor, in 2022294 

48 48 51 49 52
52 48
39 38 38 39 36 35 37 40 38 35 38 39 37 39 40 38 38 37 36 37

45 48 51 51 50 50 52 49

51 50 49 47

55

50 47 47 50
37 36 35 38

44

32

60
50
40
30
20
10
0

Average payment terms

Actual payment times

2. 

LATE PAYMENT IN MEMBER STATES 

654.  Late payments are widespread in the business environment across the EU. In 11 
out of 19 EU Member States listed in Figure 6, more than 50% of payments were 
made late in Q4 2021. 

Figure 7: Share of timely payments in EU Member States for which data is available295 

100%

80%

60%

40%

20%

0%

%
6
5

%
9
7

%
2
6

%
0
1

%
7
4

%
8
5

%
5
3

%
5
7

%
9
2

%
2
6

%
7
6

%
3
5

%
6
2

%
5
2

%
3
8

%
6
8

%
7
4

%
6
5

%
9
3

After due date (Q4 2021)

By due date (Q4 2021)

294 Source: EPR 2022, average of actual payment duration in business-to-consumers, business-to-business 
and public authorities. Note: Cyprus, Luxembourg and Malta are not included in the 2022 report 
295 Source: D&B payment survey 2022 https://www.dnb.com/en-ch/knowledge/study/payment-study-2022-
download/ 

183 

 
 
 
 
 
 
655.  Longer payment terms in B2B transactions came up even in countries with prompt 
payment  traditions  and  drew  the  attention  of  regulators.  The  Dutch  authorities 
noticed  an  increase  in  the  share  of  60-day  agreed  payment  terms  between  2004 
(0.7%)  and  2014  (1.2%)296.  The  national  law  capping  payment  terms  in  B2B 
transactions with SME creditors at 60 days, adopted in 2017, did not improve the 
situation. Another reform of the law entered into force in July 2022297, bringing 
down  the  initial  60  days  to  30.  Insufficient  enforcement  mechanisms  were 
identified  as  a  factor298,  and  introducing  monitoring  and  control  measures  are 
currently  under  consideration299.  In  Sweden,  a  government  review  showed  that 
average payment terms have increased in all sectors since 2006. The share of agreed 
payment terms of 60 days or more reached 4% of all invoices in 2016300.  

Figure 8: Reasons for accepting longer payment terms301 

296 https://open.overheid.nl/documenten/ronl-7605121f-911b-4479-bd59-16bc5c05ef5b/pdf 
297 https://business.gov.nl/amendment/legal-payment-term-large-companies-reduced-30-days/ 
298 https://open.overheid.nl/documenten/ronl-7605121f-911b-4479-bd59-16bc5c05ef5b/pdf 

299 Study under preparation by Andersson Elffers Felix – www.aef.nl 
300  Swedish  government,  June  2016,  Kartläggning  av  betalningstider  i  näringslivet.  Available  at: 
http://www.regeringen.se/4ae354/contentassets/a63b746fefc7447194413dd08ad184c6/kartlaggning-av-
betaltider-i-naringslivet-2016-slutlig-rapport.pdf 
301  Source:  Business-to-business  transactions:  a  comparative  analysis  of  legal  measures  vs.  soft-law 
instruments 
improving  payment  behaviour  https://publications.europa.eu/en/publication-detail/-
/publication/c8b7391b-9b80-11e8-a408-01aa75ed71a1/language-en/format-PDF/source-103408786 

for 

184 

 
 
 
 
3. 

LATE PAYMENT IN SECTORS 

Figure 9: Share of companies reporting average payment times above 50 days and above 75 days, by 
sector302 

70%
60%
50%
40%
30%
20%
10%
0%

Above 50 days

Above 75 days

Figure 10: 60% suppliers of the retail sector declare getting paid after more than 30 days (EPR 2022) 

What is the average time taken by your customers in each 
of the following industries to make their payments? (please 
answer in number of days)) Retail

0

0

1 to 10

11 to 20

21 to 30

31 to 50

51 to 75

76 to 100

101 to 200

201 or more

0

3%

5%

9%

9%

29%

24%

22%

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

302 Source: Intrum, European Payment Report 2022. Average actual payment times reported in business-to-
business transactions. Note: Data is not available in Cyprus, Luxembourg and Malta. 

185 

 
 
 
 
 
 
Figure 11: 31% of suppliers to the construction sector declare gettin paid in 30 days (EPR 2022) 

Q11c: What is the average time taken by your customers in each of the following 
industries to make their payments? (please answer in number of days)) 
Construction

0
1 to 10
11 to 20
21 to 30
31 to 50
51 to 75
76 to 100
101 to 200
201 or more

0%

1%

6%

12%

7%

0

0

0,05

0,1

0,15

0,2

0,25

0,3

24%
24%

26%

Figure 12: Share of on-time payments in construction sector in 2022303 

Share of on-time payments construction sector 2022

80

60

40

20

0

BG

PT

EL

HR

IE

BE

ES

CZ

IT

SK

SLO

FI

FR

DE

303  Source:  DG  GROW  based  on  D&B  Payment  Survey,  2022  https://www.dnb.com/en-
ch/knowledge/study/payment-study-2022-download/ 

186 

 
 
 
 
 
 
Figure 13: 11% of public sector's suppliers are paid within 30 days (EPR 2022) 

What is the average time taken by your customers to make their payments? 
(please answer in number of days) Public sector

0
1 to 10
11 to 20
21 to 30
31 to 50
51 to 75
76 to 100
101 to 200
201 or more

0%

1%
1%

0

0

0,05

9%

9%

0,1

Figure 14: Causes of late payment by sector304 

23%

23%

33%

0,15

0,2

0,25

0,3

0,35

80
70
60
50
40
30
20
10
0

% companies considering that late payment is related to the imbalance of power and size
between companies
% companies considering that the sector is particularly affected because of late payment in public
procurement
% companies considering that late payment in the sector is due to administrative inefficiencies
with invoice processing
% companies considering that late payment particularly affects the sector because companies
payments are interconnected in the supply chain

304  Source:  Business-to-business  transactions:  a  comparative  analysis  of  legal  measures  vs.  soft-law 
instruments 
improving  payment  behaviour  https://publications.europa.eu/en/publication-detail/-
/publication/c8b7391b-9b80-11e8-a408-01aa75ed71a1/language-en/format-PDF/source-103408786 

for 

187 

 
 
 
 
 
 
 
4. 

LATE PAYMENT BY SIZE-CLASS 

656.  Payment  discipline  by  size-class  is  not  uniform  across  the  EU.  While  large 
companies  tend  to  pay  later  than  SMEs,  in  Slovenia  and  Czech  Rep  large 
companies pay the fastest. Late payment seems to be a big issue especially in large 
countries. 

Figure 15: Share of companies paying their invoice by the due date, by size class, 2022305 

100,00%

80,00%

60,00%

40,00%

20,00%

0,00%

Micro

Small Medium

Large

5. 

PROBLEMS DUE TO LATE PAYMENT 

Figure 16: Share of companies reporting problems due to late payment from any private or public 
entities 2022306 

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305  Source:  CRIBIS  D&B  Payment  Study  2022  -  https://www.dnb.com/en-ch/knowledge/study/payment-
study-2022-download/ 
306 SAFE Survey 2022 

188 

 
 
 
 
 
 
 
Figure 17: Supply chain bullying in Europe in 2021307 

657.  Many companies suffer from an ‘intention-behaviour gap’: 69% of firms – large 
and small – admit that they ‘rarely think about the negative impact that their own 
late payments might have on suppliers’ and nearly 30% acknowledge that they pay 
their suppliers later than they would accept from their own customers308. 

6. 

DESIRED SOLUTIONS TO LATE PAYMENT 

Figure 18: New legislation is the first choice for addressing late payment (EPR 2022) 

What would you like to see nationally in order to solve the following two 
problems? Long payment terms (i.e demand of payment terms that are longer than 
national practice/ law)?

Greater transparency around corporate payment…

Payment terms fixed in law

Better enforcement of existing legislation

Introduction of new legislation

Voluntary initiatives of corporations

Use of mediation arbitration/ombudsmen

Do not know

0

26%

31%

31%

40%

34%

30%

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0,45

307 Intrum, European Payment Report 2021 
308 https://www.intrum.com/publications/european-payment-report/european-payment-report-2021/ 

189 

 
 
 
 
 
R.  ANNEX 18: PROMPT PAYMENT IN SOME EU TRADING 

PARTNERS  

1. 

SIZE OF THE PROBLEM 

658.  The figure below shows the average payment periods in 2020 worldwide and per 
sector (measured in day sales outstanding, DSO)309. Figure 19310 DSO in 2020 by 
country and sectors. 

309 Days sales outstanding (DSO) is the average number of days it takes a company to receive payment and 
it is calculated as follows: DSO= (average amount of the account receivable/revenue) * 365 days. A high 
DSO number suggests that a company is experiencing delays in receiving payments, which can result in a 
cash flow problem. A low DSO indicates that the company is getting its payments quickly. The DSO has a 
direct impact on the Working Capital Requirement of a company, on the cash and on the overall risk to have 
unpaid invoices and bad debts. Lower is a company’s DSO, lower is its WCR. The results are better cash 
flow and profitability (source: Investopedia) 
310 https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-
research/publications/specials/en/2021/july/2021_07_22_WCR.pdf 

190 

 
 
 
 
659.  Although China was the worst performer, four EU Member States are listed among 
the 10 worst payment performers in the world. At the same time three other EU 
Member States ranked amongst the top 10 performers worldwide.  

660.  Australia – Every year, late payments lock more than AUS$ 19 billion away from 
Australian SMEs. Poor cash flow is responsible for 90% of SME bankruptcies. The 
average share of timely payments to SMEs equals 38%311.  

661.  UK - In 2021, 50% of invoices issued by small businesses were paid late. 12% of 
them  were  paid  more  than  a  month  after  they  due  date,  costing  SMEs  £684m  a 
year312.  

662. 

In 2022, US SMEs were owed on average $304,066 by late-paying customers. 81% 
considered late payments to have become severer since 2021. SMEs in the US were 
spending on average 14 hours per week chasing debtors313.  

663.  The  WTO  Agreement  on  Government  Procurement  (GPA)314  is  a  plurilateral 
instrument regulating the conduct of international trade in government procurement 
markets. The GPA provides flexibility for parties to implement specific measures 
relating to procurement practices, which can be taken in the application of general 
rules  to  facilitate  SME  participation.  Examples  include  the  prompt  payment  of 
suppliers. Such measures may be needed to overcome potential barriers to SME 
participation that may persist despite a generally open and transparent system. 

664.  The Netherlands - Evidence315 indicates that some EU undertakings accept longer 
payment  terms  and  unfair  payment  conditions  from  international  (non-EU) 
partners. A share of EU late payments may be due to bad practices being ‘imported’ 
from outside the EU, and later spreading inside the EU following the domino effect.  

2. 

POLICY RESPONSE 

665.  Many countries address late payments problems towards small companies, both in 
B2B and G2B transactions, through behavioural or disclosure legislation, in some 
cases with specific rules for the construction sector addressing also late payment in 
the supply chain. 

311 https://www.ordermentum.com/blog/the-true-cost-of-late-payments 
312  https://www.icaew.com/insights/viewpoints-on-the-news/2022/oct-2022/the-impact-of-late-payments-
on-small-businesses  
313 https://www.chaserhq.com/blog/87-of-businesses-paid-late-insights-from-2022-late-payments-report  
314  The  revised  GPA  came  into  force  in  April  2014.  The  GPA  intends  to  bring  more  competition, 
transparency and procedural fairness in the procurement markets it covers. The GPA also serves broader 
purposes of promoting good governance, the efficient and effective management of public resources, and the 
attainment of best value for money in national procurement systems. The basic approach of the GPA is to 
leave  options  for  each  government  to  decide  on,  as  long  as  general  principles  of  transparency  and  non- 
discrimination are complied with. 
315 https://open.overheid.nl/documenten/ronl-7605121f-911b-4479-bd59-16bc5c05ef5b/pdf 

191 

 
 
 
2.1.  AUSTRALIA 

666.  Since 2017, the Business Council of Australia promotes the Australian Supplier 
Payment  Code316  where  members  commit  to  pay  eligible  Australian  small 
business suppliers on time and within 30 days of receiving a correct invoice, and 
help  suppliers implement  new technologies  and  practices to  speed up invoicing. 
Each  signatory  is  required  to  put  in  place  clear,  fair  and  efficient  processes  for 
dealing  with  complaints and  disputes  about  payment  times  and  practices,  which 
should be used to resolve complaints and disputes in the first instance. In January 
2019, the Code had 101 signatories with collective annual revenue of over $550 
billion. In April 2023, there are 155 signatories.  

667.  An independent review317 of the Code was finalised in 2019. The review states 
that,  unless  a  more  widespread  adoption  of  the  Code  -primarily  by  large  and 
medium-sized businesses and governments with large numbers of small business 
suppliers  and payment times beyond 30 days- improves  payment times to small 
businesses, there is the prospect of payment regulation. Some major entities yet to 
sign the Code cited the following concerns during the review: compliance risk and 
the potential impact on reputation, the challenges and costs of identifying a small 
business supplier318, uncertainty about how exemptions work319, and time needed 
to change to complex internal payments systems and processes. Regarding the size 
of  the  business  supplier,  the  review  recommended  the  establishment  of  a  small 
business register and to encourage signatories to adopt the ‘turnover’ definition of 
a  small  business  and  phasing  out  the  ‘headcount’  definition.  The  review 
recommended  the  application  of  the  ‘mutually  agreed  terms’  exemption  for 
payment beyond 30 days to be subject to a ‘good faith and fair dealings provision’ 
test, so that suppliers “are afforded both fairness of process (good faith) and fairness 
in  outcomes  (fair  dealings)”,  mirroring  the  same  provision  proposed  by  the 
independent review of the Food and Grocery Code of Conduct. The review clarified 
that  supply  chain  financing  cannot  be  used  to  get  around  the  30  days  terms 
requirement by setting terms above 30 days and then paying in less than 30 days 
(i.e. by paying a lesser sum, discounted at the signatory’s cost of funds). It also 
recommended government to develop a regular statistical series of payment times 
data across the economy, including payment times to small businesses, which could 
be developed in consultation with business information and accounting software 
providers. 

316 https://www.bca.com.au/supplier_payment_code  
317 Review of the Australian Supplier Payment Code, January 2019 
318 The review recommended the establishment of a small business register and to encourage signatories to 
adopt the ‘turnover’ definition of a small business and phasing out the ‘headcount’ definition. 
319 The review recommended the application of the ‘mutually agreed terms’ exemption for payment beyond 
30 days to be subject to a ‘good faith and fair dealings provision’ test, so that suppliers “are afforded both 
fairness of process (good faith) and fairness in outcomes (fair dealings)”.  

192 

 
 
 
in  2022,  requires 

668.  The Australian government policy RMG 417320, which came into effect 1 January 
that,  when  a  Non-corporate 
2020  and  was  changed 
Commonwealth Entity (NCE) and a supplier both have the capability to deliver and 
receive  e-invoices  through  the  Pan-European  Public  Procurement  On-Line 
framework and have agreed to use this method of invoicing, have to pay e-invoices 
within 5 days, and within 20 calendar days for all other invoices. Where a NCE has 
not made payment in full within the maximum payment terms, it must calculate 
interest, and pay that interest to the supplier if the amount accrued is more than 
A$100.  

669.  The  Australian  Small  Business  and  Family  Enterprise  Ombudsman  has 
investigated commercial payment terms to SMEs and proposed a 30 day maximum 
term.  No  law  has  yet  been  proposed,  rather  reporting  requirements  have  been 
introduced:  the  2020 Payment Times Reporting Act321, obliges large companies 
and government enterprises322 to regularly report publicly on payment terms and 
practices towards their small business suppliers323.  

670.  The Western Australian Building and Construction Industry (Security of Payment) 
Act 2021 and the NSW Building and Construction Industry Security of Payment 
Act 1999324 limit payment terms respectively to 20 and 15 business days after a 
payment claim is made by a main contractor and to 25 and 20 business days by a 
subcontractor. 

2.2.  CANADA 

671.  Canada  -  Prompt  payment  and  mandatory  adjudication  legislation  is  being 
introduced  across  Canada  to  address  payment  delays  in  the  construction  supply 
chain.  

672. 

In the federal context, under the Financial Administration Act, the Treasury Board 
Payment  Directive,  and  the  federal  government  Contracting  Policy,  there  is  an 
ordinary  course  of  payment  environment  established  that  can  fairly  be 
characterized as fundamentally based upon the core principles of prompt payment. 
In  particular  a  30-day  from  invoice  payment  cycle,  payment  of  undisputed 

https://www.finance.gov.au/publications/resource-management-guides/supplier-pay-time-or-pay-

320 
interest-policy-rmg-417/part-1-policy-and-practice  
321 Payment Times Reporting Scheme | Treasury.gov.au - https://treasury.gov.au/small-business/PTRS  
https://www.legislation.gov.au/Details/C2021C00531  
322 Income greater than $100m p/a; or Income greater than $10m p/a if the entity is part of a group with a 
combined total income of greater than $100m p/a. 
323 Reporting has to include: Standard payment periods to small businesses (including the most common, 
shortest & longest). The proportion (by total number & total value) of small business invoices paid within 
the following payment brackets from the issue date of invoice: less than 21 days, 21-30 days, 31-60 days, 
61-90  days,  91-120  days,  120+  days.  The  proportion  (by  value)  of  procurement  from  small  business 
suppliers. Details of use/offers of supply chain finance to small businesses. 
324 https://legislation.nsw.gov.au/view/html/inforce/current/act-1999-046  

193 

 
 
 
amounts, and mandatory interest which assists in ensuring that payments are made 
by the federal government promptly.325  

673.  The Federal Prompt Payment for Construction Work Act326 was passed in 2019, 
but  is  not  yet  in  force.  It  addresses  the  non-payment  of  contractors  and 
subcontractors  performing  construction  work  for  federal  construction  projects 
(with adjudication limited to payment disputes). It makes payment of interests on 
overdue amounts mandatory; it gives the right to terminate a construction contract 
for non-payment; it includes rights to information. Once in force, it will not exempt 
existing contracts but give a one-year deferral period.  

674.  Some  provinces  are  in  a  preparatory  phase  and  4  provinces  (Ontario, 
Saskatchewan,  Alberta,  Nova  Scotia)  have  in  the  meantime  introduced  and/or 
enacted prompt payment acts for the construction sector327: 

1)  Ontario: since October 2019, swift payment deadlines, requiring the owner either to 
pay  within  28  calendar  days  or  to  dispute  within  14  calendar  days,  describing  the 
reasons  for  non-payment;  the  contractor  must  either  pay  its  subcontractors  within  7 
calendar days of receipt of payment or send notices of dispute within 7 calendar days; 
adjudication is mandatory and has been introduced as a quick interim method to resolve 
disputes on a construction project.  

2)  Saskatchewan:  since March 2022, the Amendment Act  and Amendment regulations 
introduced a prompt payment and adjudication regime similar to Ontario's regime. The 
new Saskatchewan Construction Dispute Resolution Office (SCDRO) will act as the 
official adjudication authority and the ADR Institute of Saskatchewan Inc. will work 
with  the  SCDRO  to  provide  adjudicators.  The  prompt  payment  and  adjudication 
regime does not apply to architects, engineers, land surveyors and persons providing 
services or materials for any improvement with respect to a mine or mineral resource 
(including  any  activities 
regarding  exploration,  development,  production, 
decommissioning  or  reclamation)  or  an  improvement  related  to  infrastructure  in 
connection with the generation, transmission or distribution of electrical energy.  
3)  Alberta:  since  August  2022,  introduction  of  prompt  payment,  adjudication,  an 
extension of lien registration periods. Adjudication may not always be used, as parties 
may  not  refer  a  dispute  to  adjudication  if  an  action  in  court  has  already  been 
commenced. The act does not permit the use of contractual ‘paid when paid’ clauses, 
or  other  payment  terms,  to  extend  payment  deadlines.  Existing  contracts  have  until 
2024 to make their terms comply with the new provisions. Monthly billings required 
for construction projects, at least every 31 days. 

4)  Nova Scotia: since October 2022, Government has the authority to appoint an external 
their  contractors  and 

to  adjudicate  disputes  between  developers  and 

body 

325  Singleton  Reynolds  Report,  2018,  https://www.cca-acc.com/wp-content/uploads/2020/09/Building-a-
Federal-Framework-Report.pdf  
326 Limiting payment terms for federal projects to 42 days being, 28 days for payment to the prime contractor, 
7 days for following payments to subcontractors and a further 7 days for those sub-contractors to pay their 
suppliers. https://laws.justice.gc.ca/eng/acts/F-7.7/FullText.html  
https://www.cca-acc.com/advocacy/critical-issues/prompt-payment/  
327 https://www.osler.com/en/resources/in-focus/canadian-prompt-payment-and-construction-law-reforms   
https://www.on-sitemag.com/features/prompt-payment-the-state-of-play-across-canada/   

194 

 
 
 
subcontractors. Amendments to the Builders’ Lien Act will allow the new authority to 
collect and manage fees to cover the costs associated with adjudicating disputes. It will 
also define the body’s duties and powers related to training adjudicators and setting 
and  collecting  adjudication  fees.  The  legislation  further  strengthens  the  prompt 
payment process by: defining the scope of disputes that can be referred to adjudication 
to  include  disputes  related  to  the  value  of  services  or  materials  provided  under  a 
contract and disputes related to payment under a contract; setting out parameters for 
the timing of decisions. 

2.3.  CHINA 

675.  Article 161 of the Contract Law of the People’s Republic of China provides that if 
the payment time is not stated and additional agreement cannot  be reached then 
payment is due on delivery.328  

2.4. 

INDIA 

676.  The Micro, Small and Medium Enterprises Development (MSMED) Act 2006329 
limits  payment terms  to  SMEs  to  45  days  and  has  penalties  including  fines  and 
imprisonment. Firms dealing with SMEDs are required to report to the government 
on the amount and reasons for late payment. 

677.  As per rule 149 of the General Financial Rules 2017, the Indian government’s e-
marketplace  for  government  procurement  (GEM)  currently  requires  payment  of 
suppliers within 10 days. Interest will be charged from the first day beyond the 10 
day period until the payment is made. The amount collected from the late payment 
levy would be deposited in an account maintained by the GeM and shall be used 
for the education of sellers and buyers or any other purposes  related to  GeM or 
public procurement.330 

2.5. 

JAPAN 

678.  The Prevention of Delay in Payment under Government Contracts (Act No. 256 
of 1949) sets a maximum term of 40 days for government construction projects, 
and 30 days for other services to public entities. If the terms are not specified in 
contract then the default payment term is 15 days from receipt of invoice.  

679.  The  Designation  of  Specific  Unfair  Trade  Practices  by  Large-Scale  Retailers 
Relating to Trade with Suppliers by the Japanese Fair Trade Commission does not 

328 “The buyer shall effect the payment at the agreed time. If the time for payment is not stipulated or not 
clearly stipulated, nor can it be determined pursuant to the provisions of Article 61 of this Law, the buyer 
shall pay at the same time as it takes delivery of the targeted matter or receives the document for taking 
delivery  of 
targeted  matter.”  http://www.china.org.cn/china/LegislationsForm2001-2010/2011-
02/12/content_21908031.htm  
329 https://legislative.gov.in/sites/default/files/A2006-27.pdf  
330  https://economictimes.indiatimes.com/news/economy/policy/finance-ministry-to-levy-1-late-payment-
interest-on-government-e-marketplace/articleshow/76775259.cms  

the 

195 

 
 
 
 
 
apply specific maximum payment terms to the industry but it does restrict delayed 
payment in response to certain disputes331.  

680.  The  1956  Subcontract  Act[1] sets  payments  from  larger  companies  to  smaller 
‘subcontractors’ at a maximum term of 60 days from the day of delivery, regardless 
of whether or not the work has been inspected in detail. Company size thresholds 
and  payment  criteria  vary  across 
industries.  Interest  for  delay  applies 
automatically332.  The  Act  also  bans  a  list  of  unfair  practices333.The  Fair  Trade 
Commission and the Director-General of the Small and Medium Sized Enterprise 
Agency have powers of inspection and can require a main contractor to submit a 
report on its transactions. Administrative sanctions are foreseen[2].  

2.6.  NEW ZEALAND 

681.  The Construction Contracts Act334 was introduced in 2002 and amended in 2015. 
It  helps  to  ensure  a  fair,  balanced  and  appropriate  payment  regime,  provides  a 
process  for  dealing  with  payments  and  disputes  under  a  construction  contract, 
provides enforcement mechanisms to recover any unmade payments and protects 
retention  money  withheld  under  commercial  construction  contracts.  The  Act 
rendered  conditional  payment  provisions  such  as  ‘pay-when-paid’  and  ‘pay-if-
paid’ clauses in a construction contract ineffective. The default date for a progress 
payment  or  any  other  type  of  payment  under  a  construction  contract  for 
construction  work  carried  out  under  that  contract  is  20  working  days  after  the 
payment claim is served on the payer. It establishes a statutory right to progress 
payments  and  a  mechanism  for  determining  the  number  of  payments  under  the 
contract,  the  interval  between  those  payments,  the  amount  of  each  of  those 
payments and the date when each of those payments becomes due. It includes a 
not-mandatory adjudication regime. 

682.  The Fair Trading Amendment Act 2021 places new obligations on businesses 
and  provides  new  protections  for  consumers  and  small  businesses.  It:  prohibits 

331 https://taulia.com/payment-terms/japan/  
332 The statutory interest rate for commercial transactions is 3%, as set out in article 404 of the civil code. 
The rate is applicable to 31 March 2023, and is reviewed every three years.  
333  Such  as:  refusing  to  receive  the  work  from  a  subcontractor  without  reasons  attributable  to  the 
subcontractor;  failing  to  make  payment  of  subcontract  proceeds  after  the  lapse  of  the  date  of  payment; 
reducing the amount of subcontract proceeds without reasons attributable to the  subcontractor; causing a 
subcontractor to take back the goods relating to its work after receiving the work from the said subcontractor 
without  reasons  attributable  to  the  subcontractor;  unjustly  setting  subcontract  proceeds  at  a  level 
conspicuously  lower  than  the  price  ordinarily paid for  the  same  or  similar  content  of  work;  coercing  the 
subcontractor to purchase designated goods or to use designated services except in such cases where it is 
necessary to standardize or to improve the content of the work performed by a subcontractor or where there 
are other justifiable grounds; or reducing the volume of transactions, suspending transactions or giving some 
other  disadvantageous  treatment  because  the  subcontractor  informed  the  Fair  Trade  Commission  or  the 
Director-General of the Small and Medium Sized Enterprise Agency of such a fact, etc. 
334 https://www.legislation.govt.nz/act/public/2002/0046/latest/DLM163059.html  

196 

 
 
 
unconscionable conduct in trade335 and extends unfair contract terms provisions to 
cover standard form (common types of take-it-or-leave-it standard form contracts, 
like those for power and phone) small trade contracts (with a value below $250,000 
in a given year). The Commerce Commission can take action to stop a business 
using an unfair term in a contract, can apply to the court to have a term declared 
unfair and if a court decides the term is unfair, that part of the contract will not be 
legally binding on parties.336 

683.  New Zealand is in the process of passing the Business Payment Practice Bill337, 
first introduced on 25/10/2022, which will require companies with annual turnover 
of more than $33 million to report on their payment practices every six months.  

684.  The  New  Zealand  government  launched  a  public  consultation  in  2020  on  the 
subject  of  improving  business-to-business  payment  practices  and  may  in  the 
future  introduce  new  laws  limiting  government  and  commercial  payment  terms. 
The discussion paper338 is based on the premise that agreed payment terms should 
reflect  the  ability  of  twenty-first  century  technology  to  process  invoices  almost 
immediately.  It  also  quotes  the  Australian  study339  that  shows  the  costs  to  their 
economy of large businesses effectively using small ones for cheap credit is $2.54 
billion over 10 years. Xero’s Small Business Insights for January- September 2019 
show  that  small  business  invoices  on  their  platform  are  paid  8.6  days  late  on 
average. Xero estimates New Zealand small businesses are owed about $7.4 billion 
total in unpaid invoices. The discussion paper puts forward the following: 

335 If found guilty of unconscionable conduct, businesses can be convicted and fined up to $600,000 and 
individuals can be liable for fines of up to $200,000. New Zealand courts are likely to interpret the meaning 
of unconscionable conduct in a similar way to the Australian courts, as Australian law already includes a 
similar prohibition. They have interpreted unconscionable conduct as being serious misconduct that is so far 
outside  accepted  standards  of  commercial  conduct  as  to  be  against  good  conscience.  Good  business 
conscience is measured against the values and norms of modern society and expectations of what is right and 
proper according to those values and norms. Those values and norms can include acting honestly, fairly and 
without deception or unfair pressure. This is conduct that is more than just hard commercial bargaining but 
clearly unfair and unreasonable. The courts may consider a range of factors in assessing whether certain 
conduct is unconscionable and some of these factors are listed in the legislation (s8(1) of the Fair Trading 
Act). In summary, these are:  
  the relative bargaining strength of the parties 
  the extent to which the parties acted in good faith 
  whether the affected party could protect their own interests given their characteristics and circumstances 
  whether the affected party could understand documents provided to them 
  the use of undue influence, pressure or unfair tactics by the business 
  whether the business made clear to the affected person anything the business might do that would adversely 
impact the affected person’s interests or create a risk for them. 
336 https://comcom.govt.nz/business/your-obligations-as-a-business/changes-to-fair-trading-laws  
337 https://bills.parliament.nz/v/6/c1f6efb7-814b-4def-a8d4-3b0d9407b9e2?Tab=history  
338 
payment-practices  
339 
price.pdf  

https://www.xero.com/small-business-insights/wp-content/uploads/2019/06/xsbi-report-paying-the- 

https://www.mbie.govt.nz/dmsdocument/11212-discussion-paper-improving-business-to-business-

197 

 
 
 
1)  20 days maximum payment term applying to a contract for the supply of goods and 

services between entities that are in trade; 

2)  Running from the later of the day on which the goods of services to which the payment 
relates are provided and the day on which the purchaser is notified of the amount of 
the payment (i.e. receives an invoice).  

3)  If a verification is needed, then the 20 days would run from the end of the verification 
procedure,  with  the  verification  period  capped  at  a  specified  number  of  days  in  the 
legislation. The ‘verification period cap’ could be contracted out of if to do so would 
not be grossly unfair to the supplier. 

4)  Recognise  that  there  are  some  contractual  relationships  where  a  20-day  maximum 
payment  term  might  be  inappropriate,  for  example:  property  such  as  land  and 
buildings; intangible, such as rights in intangible property that can only be claimed or 
enforced  by  court  action  (intellectual  property  rights  such  as  patents,  or  shares  in  a 
company); goods subject to a ‘security’, such as a vehicle until it is paid off; services 
that are contracts of services, such as employment contracts. 

5)  Limit the proposal to contracts below a certain value (contracts that form part of trading 
relationships  with  an  annual  value  of  less  than  $250,000).  This  allows  to  take  into 
account  that  larger  contracts  are  likely  to  be  subject  to  more  sophisticated 
negotiation.340 

6)  Limit  the proposal  to  ‘standard form contracts’ (similar to  the unfair contract  terms 
provisions in the Fair Trading Act). This means that extended payment terms would 
only be prohibited in contracts that are not subject to effective negotiation.341  

7)  It would not include different maximum terms for different industries/sectors or classes 
of goods, but it would need to ensure that any industry specific regime has common 
principles and objectives.342 

8)  It would allow contracting out, but only in very limited circumstances. To this end, the 
definition of “grossly unfair” in the UK legislation is taken as possible example. 

9)  It  would  provide  for  automatic  entitlement  to  interest  for  late  payments,  but  with  a 
higher interest rate than the Interest on Money Claims Act 2016 provides for -at least 
where  small  businesses  are  the  creditors  -  to  reflect  the  true  costs  they  face  from 

340 The alternative (use the size of the two parties) would add contractual complexity in trying to define the 
size of business, and what provision to apply and would not take into account that poor payment practices, 
such as delayed payment terms, can also occur between small businesses. 
341 This would protect entities in cases where there are imbalances of power, but would still allow for, say, 
two very large organisations to trade on terms mutually agreed through effective negotiation. 
342 For instance, the construction sector, characterised by large and bespoke projects, and a retention regime, 
already has its own system for regulating payments under the Construction Contracts Act 2002, this includes 
a regime for dealing with disputes as an alternative to the Courts. 

198 

 
 
 
deferred payment:  the Reserve Bank of New Zealand’s six-month term  deposit  rate 
plus a base rate of five percentage points.343 

10) It  would  introduce  an  implied  dispute  resolution  clause.  This  would  mean  that,  if 
contracts did not include their own provisions around dispute resolution, they would 
be required to include a clause as specified in the legislation. 

2.7. 

TÜRKIYE 

685.  Türkiye  -  The  2012  Commercial  Code  includes  provisions  preventing  large 

enterprises from imposing long/late payment terms on suppliers344. 

686.  Maximum payment term in a contract is 60 days starting from the due receipt of 
the invoice or goods/services or the end of the inspection term, as applicable. The 
parties can extend such maximum term with mutual agreement, provided that such 
extension does not cause a gross burden on the other party. However, the maximum 
term cannot be extended in any circumstances if any of the following apply: (1) the 
recipient of the payment is a small or mid-size enterprise (SME); or (2) the payment 
obligor is a large scale enterprise; or (3) the recipient is an agricultural or livestock 
producer. 

687. 

In case of breach, the payment term will be deemed as 30 days -starting from the 
receipt by the purchaser of the invoice/payment request- and the purchaser will be 
deemed in default as of the end of such 30 day period. Default interest will begin 
to accrue automatically at the end of the 30 days with no requirement for further 
notice. Contractual provisions indicating that the purchaser shall not be obliged to 
make a default interest payment to the supplier shall be null and void and, if the 
agreed default interest rate is grossly unfair, the applicable default interest to be 

343 New Zealand already has legislation that gives businesses the right to interest as compensation for late 
payments  if  a  business  takes  civil  proceedings  (goes  to  court).  The  Interest  on  Money  Claims  Act  2016 
provides “for the award of interest as compensation for a delay in the payment of debts, damages, and other 
money  claims  in respect  of  which  civil proceedings  are  commenced”.  That  is,  if  a  business  take  another 
business to court for a late payment, the Interest on Money Claims Act sets out how to calculate the interest 
one has to receive. The rate is intended to “reflect fairly and realistically the cost to a creditor of the delay in 
payment of a money claim by a debtor”. 
344  Maximum  payment  term  in  a  contract  is  60  days  starting  from  the  due  receipt  of  the  invoice  or 
goods/services or the end of the inspection term, as applicable. The parties can extend such maximum term 
with  mutual  agreement,  provided  that  such  extension  does  not  cause  a  gross  burden  on  the  other  party. 
However, the maximum term cannot be extended in any circumstances if any of the following apply: (1) the 
recipient of the payment is a small or mid-size enterprise (SME); or (2) the payment obligor is a large scale 
enterprise; or (3) the recipient is an agricultural or livestock producer. 
In case of breach, the payment term will be deemed as 30 days starting from the receipt by the purchaser of 
the invoice/payment request, and the purchaser will be deemed in default as of the end of such 30 day period, 
default interest will begin to accrue automatically at the end of the 30 days with no requirement for further 
notice; contractual provisions indicating that the purchaser shall not be obliged to make a default interest 
payment to the supplier shall be null and void and, if the agreed default interest rate is grossly unfair, the 
applicable  default  interest  to  be  paid  by  the  purchaser  shall  be  the  statutory  commercial  interest  rate 
determined by the Turkish Central Bank + 8%. 

199 

 
 
 
 
paid by the purchaser shall be the statutory commercial interest rate determined by 
the Turkish Central Bank + 8%. 

2.8.  UNITED KINGDOM 

688.  Legislation to combat late payment transactions has been in place since 1998345 and 

is now under revision346.  

689.  Regulations made under sections 3 and 161 of the Small Business, Enterprise and 
Employment Act 2015 (and for limited liability partnerships (LLPs), made under 
section 15 and 17 of the Limited Liability Partnerships Act 2000), introduce a duty 
on the UK’s large companies and LLPs to report on a half-yearly basis on their 
payment practices, policies and performance for financial years beginning on or 
after 6 April 2017. The review of this duty concluded that the Regulations have 
brought  greater  transparency  to  the  payment  practices  and  performance  of  large 
businesses,  the  policy  remains  appropriate  because  there  is  an  ongoing  need  to 
ensure greater compliance in terms of prompt payment and to increase awareness 
of the performance of large businesses in this area. In addition, having considered 
alternatives  that  may  impose  less  regulation,  the  review  concluded  that  the 
Regulations were the appropriate mechanism to address the policy objectives.  

690.  The  Prompt  Payment  code347  was  established  in  2008  and  sets  standards  for 
payments between organisations of any size and their suppliers. It initially required 
to pay promptly (within agreed terms), to give clear guidance to suppliers on terms, 
dispute  resolution  and  prompt  notification  of  late  payment  and  to  support  good 
practice throughout their supply chain by encouraging adoption of the Code. It was 
changed  in  2021,  requiring  confirmation  from  all  signatories  by  2022,  and 
additionally asked to pay 95% of invoices within 60 days and 95% of invoices to 
businesses with less than 50 employees within 30 days. 

691.  Section  110  of  the  Housing  grants,  Construction  and  Regeneration  Act  1996 
applies the “Scheme for construction contracts” where a construction contract 
fails to provide a payment term. The scheme terms are 7, 17 and 30 days depending 
on the type of payment. 

692.  The  government  committed  to  pay  90%  of  undisputed  and  valid  invoices  from 
SMEs  within  5  days  and  100%  of  all  undisputed  and  valid  invoices  to  be  paid 
within 30 days. Government departments are required to report their performance 
against these payment targets on a quarterly basis on GOV.UK.  

693.  All organisations bidding for government contracts over 5 million pounds have to 
demonstrate that they pay 95% of all supply chain invoices within 60 days.  

345  The  UK  national  legislation  to  combat  late  payments  (“The  Late  Payment  of  Commercial  Debts 
Regulation of 2013 https://www.legislation.gov.uk/uksi/2013/395/contents/made) is the transposition in the 
UK of the LPD.  
346 Amendments to the Payment Practices and Performance Regulations 2017 - (www.gov.uk) 
347 https://www.smallbusinesscommissioner.gov.uk/ppc/about-us/  

200 

 
 
 
694.  Through the Public Contract Regulations 2015, public sector buyers must include 
30-day payment terms in new public sector contracts; and require that this payment 
term  be  passed  down  the  supply  chain.  Public  sector  buyers  must  also  publish 
annual reports on their payment performance.348 

2.9.  USA 

695. 

In  2014  the  US  government  launched  the  Supplier  Pay  Initiative  with  26  large 
companies, pledging to pay smaller suppliers earlier and provide more affordable 
working  capital  financing. The rationale behind  the initiative is that, while slow 
payment of suppliers makes the large firm’s cash flow look better, it hurts supplier 
investment,  thus  reducing  supplier  quality,  innovation  and  on-time  delivery. 
Alternatively, suppliers will build their increased financing costs into their prices 
which ultimately hurts the original equipment manufacturers’s bottom line.  

696.  While the number of companies signing up for SupplierPay grew from 26 in 2014 
to 47 in 2015, the program has had limited results. Flowcast examined the days 
payable  outstanding  (DPO)  of  17  of  the  first  26 pledged  companies  to  find  that 
more  than  half  of  those  companies  had  actually  extended  their  overall  payment 
days, to a median of +1.9 days. The Initiative was found to lack enforcement, to 
disregard the prisoner’s dilemma effect, to not prevent signatories from forcing the 
added costs resulting from earlier payments back onto suppliers, to not encourage 
enough  Supply  Chain  Finance  without  tying  its  availability  to  an  extension  of 
payment  terms  and  to  not  look  enough  into  the  benefits  of  digitalisation  of 
payments.349 

697.  The  Perishable  Agricultural  Commodities  Act  of  1930  requires  “full  payment 
promptly” by agents, buyers and brokerages for agricultural goods in the United 
States.  Maximum  payment  times  range  from  5  to  30  days  depending  on  the 
circumstances  set  out  in  7  CFR  46.2(aa).  In  addition,  a  few  US  States  (Idaho, 
California,  Oregon,  Washington)  have  adopted  specific  B2B  legislation  in  the 
agriculture domain, in some cases limited to specific products (mostly grain).350 

698.  The 1982 Federal Prompt Payment Act351 requires federal agencies to pay their 
bills  on  time  and  to  pay  interest  penalties  when  payments  are  made  late.  The 
government  should  pay  with  30  days  and  15  days  for  ‘fast  pay’  terms  aimed  at 
SMEs. Federal construction contracts must include a prompt payment clause where 
the  prime  contractor  has  to  pay  subcontractors  for  ‘satisfactory’  performance 
within 7 days of receipt of payment. Agencies are to ‘accelerate payments to all 
prime  contractors,  in  order  to  allow  them  to  provide  prompt  payments  to  small 
business subcontractors’. Barrot and Nanda (2016) investigate the impact of the US 
Quickpay  reform,  which  accelerated  federal  government  payments  to  small 
business contractors, and document that its implementation, by reducing payment 

348 https://www.gov.uk/guidance/prompt-payment-policy#prompt-payment-in-government-contracting  
349 https://spendmatters.com/tfmatters/5-reaasons-why-obamas-supplierpay-isnt-working/  
350 https://taulia.com/payment-terms/united-states/  
351 Prompt Payment (treasury.gov) 

201 

 
 
 
terms,  has  had  a positive indirect  impact  on employment  growth  in  the  affected 
firms.  

699.  The timing for payment on non-federal projects varies by state and project type. 
Nearly every US state has laws that set payment deadlines on construction projects. 
The timing of payments and penalties for non-compliance vary widely. Most states 
have laws that apply to both private projects and public projects. However, some 
states  only  set  requirements  for public projects.  In some states, the same  statute 
applies to payments on both public and private projects. In others, different laws 
apply to each type of project. State prompt payment laws set deadlines for payment 
on  every  project  tier,  including  payments  from  the  property  owner  to  the  prime 
contractor, from the prime to subcontractors, and so on. Furthermore, some states 
create  a  distinction  between  progress  payments  and  final  payments,  including 
retainage, with different deadlines for each. 352 

352 https://www.levelset.com/prompt-payment  

202 

 
 
 
 
 
 
S.  ANNEX 19: PROBLEM DEFINITION AND THE PROBLEM TREE 

Figure 20: Late payment problem - context, drivers, and consequences 

Figure 21: Late payment problem - general and specific objectives 

203 

 
 
 
 
 
 
T.  ANNEX 20: CONSEQUENCES OF LATE PAYMENT 

700.  Late  payment  creates  a  domino  effect  that  leads  to  more  late  payment. 
Consequences of late payment spread along and across supply chains, industrial 
ecosystems,  and  the  entire  economy.  70%  of  EU  companies353  confirmed  that 
receiving payments faster would let them faster pay their own suppliers (varying 
from 82% for France, 80% for Switzerland, 79% for the Netherlands and 75% for 
Ireland, Greece, Bulgaria and Austria).  

701. 

In a 2013 US Working Capital Survey, it was found that companies in the upper 
quartile of their industries pay their suppliers on average in 35.8 days, almost 11 
days slower than companies at the median. A report found that there are possibly 
two  reasons  for  large  buyers  not  to  help  suppliers  reduce  their  working  capital 
costs:  competing  priorities  within  corporations354  and  conflicting  incentives 
between  corporations355.  A  report  by  Spend  Matters  analysed  data  on  public 
companies  and  found  that  in  17  of  the  largest  manufacturing  industries,  higher 
shareholders returns were correlated with shorter payments; shorter payments tend 
to strengthen supply chains356. 

702.  Making a company’s cash flow weaker increases the likelihood that the company 
would seek to pay late357. The company is twice as likely to unilaterally decide to 
pay  late  than  to  formally  seek  an  agreement  on  the  extension  of  the  terms  of 
credit358.  

1. 

LATE PAYMENTS REDUCE COMPETITIVENESS 

703.  Late  payment  slows  down  the  circulation  of  money  in  the  economy,  increases 
financing costs and causes companies to forego attractive business opportunities.  

353 Source: https://www.intrum.com/press/news-stories/the-damaging-effect-of-late-payment/ 
354  Accounting  departments  maximise  available  cash  and  strong  flow  management,  while  procurement 
departments may care more about having strong suppliers that benefit from quick payment. 
355 Investment in technologies, equipment, and workers throughout the supply chain ultimately benefits all 
firms in that system. If only one customer slows payment, the overall damage done to the supply chain is 
fairly  small,  as  other  firms  will  continue  to  fund  the  working  capital  needs  of  their  common  suppliers. 
However,  if  other  companies  find  themselves  at  a  competitive  disadvantage,  they  may  follow  suit. 
Collectively, these large firms could diminish the investment capacity of their common supply chain. The 
choice of large firms not to pay quickly represents a classic collective action problem known as a prisoner’s 
dilemma. 
356 https://www.commerce.gov/sites/default/files/migrated/reports/supplierpayv25.pdf  
357 https://www.accaglobal.com/content/dam/acca/global/PDF-technical/small-business/pol-tp-elp-
1stock.pdf 
358 https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-
Research-Sage.pdf 

204 

 
 
 
 
704.  One-day reduction in payment delays would increase EU companies’ aggregated 
cash flow by 0.9%359 and could save EUR 158 million in financing costs360 - see 
Annex 4 for the calculation of these figures. 70% of companies declare that faster 
collection of receivables would allow them to pay their own suppliers faster361. 

705.  4  out  of  10  companies  consider  late  payments  to  slow  down  their  company’s 
growth and lose its competitive edge362. The absence of predictable income flows 
makes companies seek to better manage their financial exposure and prevents them 
from starting new projects, filling large orders, or investing in new equipment. 

706.  Late  payments  are  the  second  most  critical  barrier  for  growth  and  for  the  twin 
transition (after administrative burden)363. 67% of businesses would improve their 
sustainability and green performance if payments were faster, 40% would expand 
abroad, 47% would hire more employees, and 70% would pay their own suppliers 
faster364.  

1.1. 

LATE PAYMENTS INCREASE HASSLE COSTS OF CHASING DEBTORS  

707.  The resources - time and money - spent chasing customers for payment represent 
an unnecessary addition to a company’s operating expenses. Late payment causes 
unnecessary and unprofitable paperwork365.  

708.  Monetary  estimates  associated  with  chasing  late  payments  as  an  administrative 
task366 range from USD 1,200 in France to USD 2,800 in Germany per SME per 
year. These costs include the costs of facilities needed to perform the chasing in 

359 Commission Study: Building a responsible payment culture – improving the effectiveness of the Late 
Payment Directive.https://op.europa.eu/en/publication-detail/-/publication/cb4bc1bd-1467-11ed-8fa0-
01aa75ed71a1/language-en/format-PDF/source-search 
Ferrara A., Ferraresi M. (2022), Assessing the economic impact of faster payments in B2B commercial 
transactions. Final Report, JRC Study https://publications.jrc.ec.europa.eu/repository/handle/JRC130205 
and https://op.europa.eu/en/publication-detail/-/publication/fa844000-356a-11ed-9c68-
01aa75ed71a1/language-en/format-PDF/source-283038902  
360 Ex-post Evaluation of the Late Payment Directive https://publications.europa.eu/en/publication-detail/-
/publication/400ecc74-9a54-11e5-b3b7-01aa75ed71a1 The Evaluation was carried out in 2015 based on a 
model built on the results of a large company survey 
361 Source : Intrum, European Payment Report 2022 https://www.intrum.com/publications/european-
payment-report/european-payment-report-2022/ 
362 Intrum, European Payment Report 2022 https://www.intrum.com/publications/european-payment-
report/european-payment-report-2022/ 
363 https://europa.eu/eurobarometer/surveys/detail/2244  
364 Intrum, European Payment Report 2022 https://www.intrum.com/publications/european-payment-
report/european-payment-report-2022/ 
365 A UK study concluded that chasing debtors can cost SMEs up to 3% of their turnover. The study found 
that an average UK SME is chasing five outstanding invoices at any one time, amounting to an average of 
£8,500 being owed. Chasing debtors costs the average UK SME 1.5 hours per day – or almost 900,000 
hours in total, across all SMEs, per dayhttps://www.tide.co/blog/tide-update/new-research-uk-smes-
chasing-50bn-in-late-payments/ 
366  2017  UK  study:  “The  Domino  Effect:  the  impact  of  late  payments”,  https://www.sage.com/en-
gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-Research-Sage.pdf 

205 

 
 
 
addition  to  the  costs  of  human  resources,  but  exclude  software  costs,  the 
opportunity-cost of lost investments or new contracts missed. 

1.2. 

LATE PAYMENTS INCREASE COST OF FINANCING  

709.  Predictability of income flows influences a company’s credit rating and affects its 
ability to obtain financing. Deterioration in cash flow due to late payments may 
make it difficult for the debtor to repay loans, increasing the level of risk reflected 
in the credit rating, which determines the cost of funding. Higher levels of risk carry 
higher costs. The larger the degree to which late payments affect a company, the 
less favourable conditions the company will obtain from its providers of finance.  

710.  SMEs affected by late payments are likely to pay higher interest rates367 and other 
charges.  Financial institutions require higher risk premiums because the funding 
they  provide  to  their  clients  is  effectively  transferred  to  third  parties  –  debtors. 
Lenders  tend  to  reduce  the  amounts  of  loans  granted  to  SMEs  affected  by  late 
payments and require a shorter maturity horizon368. 

2. 

LATE  PAYMENTS  INCREASE  UNCERTAINTY  AND  THE  RISK  OF  RUNNING  A 
BUSINESS 

711.  Widespread  late  payment  practices  increase  market  uncertainty369  and  directly 
affect an economy’s competitiveness and efficiency. In an environment dominated 
by  late  payment,  most  companies  adopt  prudential  measures  to  manage  the 
additional risks stemming from late payment. These measures have a cost, which 
has  no  corresponding  benefit  to  match,  adversely  affecting  productivity, 
profitability, and competitiveness.  

712.  Running a business in a late payment environment is riskier because every trade 
credit  sale  is  riskier  than  in  a  timely  payment  environment.  Banks  are  wary  of 
granting funding to customers who are not skilled at collecting their receivables 
and  they  consider  it  as  an  important  risk  factor.  The  existence  of  late  customer 
payments  raises  a  company’s  probability  of  default  by  25%,  and  by  40%  if 
payments are over one month late370. 

2.1. 

LATE PAYMENTS REDUCE INVESTMENT CAPACITY 

713.  Unpredictable cash flows negatively affect investment decisions, both made by the 
company and considered by providers of investment financing. Shortages of cash 
flow  can  make  it  difficult  for  small  businesses  to  pay  their  operating  expenses 

367 During the 12 months of 2020, the cost of working capital finance for SMEs had increased by 30-35% 
in the UK, the Netherlands, Germany, the US, Italy and the Nordic region. 
https://www.gtreview.com/news/global/cost-of-working-capital-finance-soars-for-smes-survey-finds/  
368 https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2022-
Rome/papers/EFMA%202022_stage-3032_question-Full%20Paper_id-161.pdf  
369 https://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp531_en.pdf  
370 https://publications.banque-france.fr/en/do-late-customer-payments-impact-companies-probability-
default  

206 

 
 
 
leaving no room for funding their future needs (investment). Most bank lenders, 
who are the main provider of finance to SMEs, will not grant long-term investment 
funding, riskier than short-term finance, when the risk related to a company’s short-
term operations is high. 

2.2. 

LATE  PAYMENTS  INCREASE  LIQUIDITY  RISK  AND  THE  RISK  OF 
BANKRUPTCY 

714.  Cash flow is the lifeblood of any business and sufficient liquidity is legally required 
for  companies  to  do  business371.  Timely  payments  are  essential  not  only  for 
continuing  going  concern,  but  also  for  competitiveness  and  growth.  Access  to 
finance is usually more restrained for SMEs than for large companies, which makes 
them more reliant on regular streams of cash from operations.  

715.  Late payments in commercial transactions, can drive companies out of business372. 
Every  insolvency  triggers  undesirable  effects  for  the  whole  economy:  jobs  lost, 
unpaid  debts,  tax  revenue  lost,  which  affect  competitiveness  and  local 
communities. Payment delays are estimated to cause 1 out of 4 bankruptcies373. In 
France, payment delays exceeding 30 days increase the probability of bankruptcy 
by 40%374. Receivables overdue by more than 60 days or more severely affect the 
economic  standing  of  companies375.  More  than  170.000  (12%)  of  Spanish 
companies are at risk of bankruptcy due to late payments376.  

2.3. 

LATE PAYMENTS REDUCE TRUST AND CONFIDENCE IN THE MARKET 

716.  Late payments damage trust in  the marketplace  and lead to  foregoing  profitable 
business  opportunities.  Businesses  not  receiving  payment  on  time  have  fewer 
incentives  to  trust  business  partners.  The  fact  that  most  companies  never  claim 
compensation for late payment points to the limited trust in market enforcement 
authorities. Instead, companies may tighten payment terms granted to customers, 
e.g. by reverting to cash prepayments, at the expense of losing some contracts, step 
up their internal trade credit control activities (at a cost), or consider moving the 
business  abroad  where  payment  performance  is  better.  When  suspicion  and 
mistrust are a norm in business relationships, companies instigate safeguard clauses 
and  require  intensive  legal  assistance.  They  are  likely  to  be  more  prudent  or 

371 Inability to meet short-term obligations requires companies to file for bankruptcy. 
372 W. Connell, The Economic Impact of late payments, DG ECFIN, Economic Papers 531.  
https://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp531_en.pdf 
373 Business-to-business transactions: a comparative analysis of legal measures vs. soft-law instruments for 
improving  payment  behaviour  https://publications.europa.eu/en/publication-detail/-/publication/c8b7391b-
9b80-11e8-a408-01aa75ed71a1/language-en/format-PDF/source-103408786 
374Les retards de paiement des clients impactent-ils la probabilité de défaillance des entreprises ?, Bulletins 
de 
819416_bdf227-
- 
8_late_customer_payment_vfinale.pdf (banque-france.fr)  
375 W. Rogowski, Payment delays : Reasons, Scale and Consequences, Journal of Management and Financial 
Sciences, Warsaw School of Economics, 2017  
376  Estudio  de  la  gestión  del  riesgo  de  crédito,  CyC  Atradius  and  Iberinform,  November  2022  171.000 
empresas consideran que la morosidad amenaza su supervivencia (creditoycaucion.es)  

la  Banque 

-February 

January 

France 

227/8 

2020 

de 

n. 

207 

 
 
 
unwilling  to  establish  new  business  relationships.  Consequently,  lack  of  trust 
increases  the  cost  of  doing  business  and  accounts  for  unrealised  business 
opportunities.  

2.4. 

LATE PAYMENTS RESULT IN JOBS LOST 

717.  Employment suffers  from  late payment practices.  Not only  can the lack of cash 
flow make it difficult for companies to pay their employees, but also the cash flow 
liberated and reinvested in the economy would pay for additional 6 million jobs in 
the EU every year377. Should the public sector make all its payments on time, it 
would allow companies from sectors which highly depend on contracts with public 
administration  to  increase  employment  by  0.7%.  This  would  represent  900,000 
more jobs in those sectors378. 

3. 

LATE  PAYMENTS  REDUCE  PARTICIPATION  OF  SMES 
PROCUREMENT 

IN  PUBLIC 

718.  Countries  that  work  with  longer-than-average  payment  periods  witness  lower 
participation  rate  of  SMEs  in  public  procurement.  Public  procurement  has  a 
significant economic impact and is a major channel for European investments. It 
accounts for 14% of the EU's GDP. Promptness and certainty of payment are key 
in  supporting  the  financial  capacity  of  companies,  especially  SMEs,  and  their 
participation in tendering processes379. Public authorities’ poor payment behaviour 
discourages SMEs from taking part in public procurement (see section 2). Delays 
in payments have a particularly adverse effect on smaller firms380.  

4. 

LATE PAYMENTS PRODUCE NEGATIVE SOCIETAL OUTCOMES 

719.  Late  payments  negatively  affect  the  well-being  of  entrepreneurs381.  In  a  survey 
carried  out  in  2020,  entrepreneurs  declared  that  late  payments  lead  to  anxiety, 
stress, and panic attacks in 88% of cases, makes running a business less enjoyable 
(66%), and undermines their confidence as an entrepreneur (25%). Entrepreneurs 

377 JRC 2018 
378 https://www.journals.uchicago.edu/doi/epdf/10.1086/713502  
379 Commission study on public procurement 2019 - analysis of the SMEs' participation in public 
procurement and the measures to support it - https://op.europa.eu/o/opportal-service/download-
handler?identifier=eec8227c-ecc4-11ea-b3c6-
01aa75ed71a1&format=pdf&language=en&productionSystem=cellar&part= 
380 See the VVA reports for the European Commission on late payment, i.e. the Ex-post evaluation of the 
Late Payment Directive (2015); Study on late payment in B2B transactions (2018). Available at: 
https://ec.europa.eu/growth/smes/support/late-payment_fr.  
381 “Late payments took me to a frightening place”, The Guardian, May 2017 
https://www.theguardian.com/small-business-network/2017/may/23/late-payments-mental-health-stress-
prompt-payment-directory-booking-live 
Prévenir le suicide des chefs d’entreprise – Essentiel Santè Magazine, 12.12.2016 https://www.essentiel-
sante-magazine.fr/sante/travail/apesa-france-aide-psychologique-entrepreuneur 
Giuseppe Bortolussi, L’economia dei suicidi- Piccoli imprenditori in crisi , Marcianum Press, 2012 

208 

 
 
 
interviewed declared that late payments determine anxiety, stress, and depression 
in 63% of cases. The impact is greater among younger entrepreneurs382.  

720.  Research  commissioned  by  the  South-African  government  in  2020383  concluded 
that late payments had negative social implications for 99% of the respondents. The 
most serious outcome was the “inability for small business owners to support their 
families”  (e.g.  pay  school  fees  and  provide  food).  Other  negative  impacts  were 
“strained relations with employees” and “damaged reputation in the market”.  

721.  Late payment affects the quality, choice, and continuity of provision of essential 
goods and community services. Replies to the call for evidence have highlighted 
the following examples: public and collective transport384, medicines and medical 
devices  for  health  care385,  information,  communication  and  media386, translation 
and  interpretation  services387,  instrumental  for  living  and  working  in  the  single 
market;  social  cooperatives  providing  services  of  general  interest  (e.g.  cultural, 
educational, environmental, integration of disabled and marginalised people in the 
society)388. 

382 “The shocking impact of late payments on mental health”, February 2022 
https://brodmin.com/payments/late-payments-and-mental-health/ 
https://www.verywellmind.com/the-relationship-between-debt-and-mental-health-5120085 
383 DPME (2020) “Research on the Delays and Non-payment by Government on Small, Micro and Medium 
Enterprises - Full Report”, Pretoria: Department of Planning, Monitoring and Evaluation 
384 Call for Evidence, feedback F3388590 
385 Call for Evidence feedbacks F3388002, F3388677, F3375926 
386 Call for Evidence feedback F3388929 
387 Call for Evidence feedbacks F3388141, F3388154 
388 Call for Evidence feedback F3388621 

209 

 
 
 
 
 
U.  ANNEX 21:   LIST OF BILATERAL MEETINGS (TARGETED 

CONSULTATIONS) 

722. 

In line with the consultation strategy, a large number of meetings took place, either 
bilateral with individual stakeholders or with designated groups of experts. 

Mr. Spyridon, European Builders Confederation 

11-10-2022 

BusinessEurope  

Cooperatives Europe 

Assemblée nationale (FR) 

Family Businesses Europe 

Eurocommerce 

SME Assembly 

SMEunited 

Dutch Royal Metaalunie 

19-10-2022 

27-10-2022 

09-11-2022 

10-11-2022 

15-11-2022 

29-11-2022 

06-12-2022 

06-12-2022 

ANGED  -  Asociación  Nacional  Grandes  de  Empresas  de 
Distribución 

14-12-2022 

Trade Promotion Europe 

AIM – European Brands Association 

24-01-2023 

01-02-2023 

Association Française des Credit Managers & Conseils  

02-02-2023 

IAPMEI (Portuguese institute for SMEs and innovation) 

03-02-2023 

Eurochambres 

Confcommercio 

Employers group of the EESC 

14-02-2023 

14-02-2023 

16-02-2023 

210 

 
 
 
Industrial Forum 

CEPYME (Spain)  

Renew – EP 

20-02-2023 

01-03-2023 

07-03-2023 

PIMEC - Micro, petita i mitjana empresa de Catalunya 

08-03-2023 

PMCM - Plataforma Multisectorial contra la Morosidad 

SMEunited 

SME Envoys 

10-03-2023 

21-03-2023 

211 

 
 
 
 
 
V.  ANNEX 22:  DIGITAL TOOLS  

Facilitating prompt payment through modern digitalisation tools 

1. 

INTRODUCTION 

723.  The current Late Payment Directive came into force in a world that was a lot less 
digital. Over those past 10 years, digitalization has had a profound impact on all 
aspects of society, including on business management. It has transformed the way 
businesses communicate, access information, market their products and services, 
streamline  their  operations,  increase  mobility,  improve  customer  service,  and 
enhance  their  security  measures.  Businesses  that  embrace  digital  tools  and 
strategies are generally seen as more likely to succeed and remain competitive in 
today's fast-paced business environment.  

724.  Measures introduced by this revision should fit into this contemporary environment 
and therefore be ‘digital by default’. Already in the Call for Evidence (CfE), we 
highlighted  that  ‘facilitating  timely  payments,  by  promoting  the  use  of  modern 
digital payment tools  and building up an “SME-friendly” business  environment, 
supportive of timely payments’ was one of the pillars on which the revision would 
be constructed.389  

725.  The impact assessment has put forward a preferred option to deal with the identified 
problem of late payment and its drivers. Digital tools and solutions will play an 
important role in some of the measures included in this preferred option and will 
impact  their  feasibility  and  cost-effectiveness.  This  concerns  for  instance  the 
obligation to designate bodies responsible for the enforcement. Furthermore, MS 
are requested to foster the use by SMEs of digital tools for timely payments. 

726.  Since the adoption of the LPD, digital solutions have become universally available 
on  the  market,  including  automated  accountancy  programs,  which  can  foster 
prompt  payment  by  providing  liquidity  management  solutions.  Digital  solutions 
can boost transparency and facilitate reporting obligations resulting from several 
legal instruments. The directive on electronic invoicing in public procurement aims 
to make the use of e-invoicing widespread. The VAT in the digital age proposal 
aims to make compliance with VAT easier for businesses by better harnessing the 
potential offered by digitalisation. Public authorities and companies could benefit 
from open and reusable digital solutions which the Commission is making available 
for free (eID, eSignature, eDelivery etc.). 

2. 

E-INVOICING 

727. 

In the context of this revision, a first question that comes up, is whether companies 
can be forced into the use of e-invoicing. E-invoicing has the potential to impact 

389 European Commission, 2023. Call for evidence for the revision of the Late Payments Directive, available 
at:  https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13665-Late-payments-update-
of-EU-rules_en 

212 

 
 
 
payment terms through shortening the processing time of invoices and/or reducing 
the likeliness of errors in the invoicing process. This can lead to positive effects on 
payment terms and a reduction in disputes surrounding payments.  

728.  For  G2B  transactions,  contracting  authorities  in  the  MS  receive  and  process 
electronic  invoices  which  comply  with  the  European  standard  on  electronic 
invoicing. This mandatory EU standard ensures the interoperability of e-invoices 
across MS. This has further been supported by the Connecting Europe Facilities 
Programme390.  The  use  of  e-invoicing  in  G2B  transactions  has  proven  to 
significantly shorten payment periods391, particularly in MS where payment delays 
in public procurement were/are endemic.  

729.  Where  B2B  transactions  are  concerned,  in  2020,  32%  of  EU  businesses  used 
structured e-invoices, accounting to around 7 billion e-invoices392. Use was shown 
to increase with the size of businesses: 30% of small enterprises, 38% of medium 
and 53% of large enterprises used structured e-invoices at that time. The VAT in 
the digital age is expected to lead to an increase in these numbers. 

730.  Notwithstanding the legal reservations to require companies to use as mandatory 
e-invoicing (see section 5.4 and Annex 14), experience also shows that the impact 
on payment behaviour is to be regarded only as a possible ancillary effect393. The 
2022  Economisti  Study  concluded  that  in  B2B  transactions,  e-invoicing  is 
potentially a facilitator of better payment behaviour but, in itself, it is unlikely to 
have a significant impact in changing or improving that behaviour in absence of 
other  factors,  namely  better  enforcement394.  These  findings  are  backed  by  the 
respondents in the SME panel carried out for this IA: 31% of respondents said that 
e-invoicing helped them to receive payments on time, 44,2% stated that e-invoicing 
did not help, while 17,9% do not use this facility and 6,9% did not answer.  

731.  While  the  potential  of  e-invoicing  to  support  timely  payments  thus  justifies  the 
encouragement and promotion of its use, an overall obligation would induce certain 
costs and administrative burden on SMEs who have not yet adopted the necessary 
tools, and would not be in line with the overall target overall reduction of reporting 

https://commission.europa.eu/funding-tenders/find-funding/eu-funding-programmes/connecting-

390 
europe-facility_en  
391 Economisti Associati, 2022. Study on building a responsible payment culture in the EU: improving the 
effectiveness of the Late Payment Directive (2011/7/EU). 
392 ibid 
393 Economisti Study 2022. In the Study refereferences are made to some dedicated studies carried out in 
France on htis matter 1)  Ministère de l'Économie, des Finances et de la Relance, Rapport de la Direction 
Générale  des  Finances  publiques  -  La  TVA  à  l’ère du digital  en  France,  Octobre 2020  (page  53).  which 
clearly guards against excessive expectations regarding the effects of e-invoicing on payment behaviour (“Or 
pour l’ensemble des acteurs rencontrés … le simple envoi dématérialisé des factures n’est pas de nature à 
diminuer mécaniquement la part des paiements excédant les délais légaux.“) 
394  ”Overall,  it  can  be  concluded  that  in  B2B  transactions  e-invoicing  does  contribute  to  create  the 
conditions for prompt payments, but its role remains secondary, and the impact is likely to be small, if not 
supported by other accompanying measures and better enforcement of the rules.”  

213 

 
 
 
obligations and other burdens as announced by the Commission Communication 
on Competitiveness395. 

3. 

DIGITAL BUSINESSES – DIGITAL LITERACY 

732. 

Increasing digital literacy396 amongst businesses ensures the ability to utilise digital 
(payment) tools, including the sending and accepting of e-invoices. Beyond being 
equipped to speed up the payment process and reduce the opportunities for delayed 
payment, digitalisation at  the level  of the individual employee and business  can 
lead  to  wider  improvements  in  efficiency,  customer  engagement,  regulatory 
compliance and  competitiveness.  In sum,  improving  digital literacy is  important 
for businesses so they can benefit from, and take part in, the digital transition. The 
Commission is already very active in shaping Europe’s digital future and provides 
support focused on bringing digital technology to businesses, citizens and public 
administrations.397 

733. 

In addition to e-invoicing, improving digital literacy in general thus improves the 
overall competitiveness of companies and their ability to deal with (late) payments 
in  particular.  As  it  stands,  large  enterprises  dwarf  SMEs  when  it  comes  to  the 
adoption of all major digital practices.398 Additionally, both large enterprises and 
SMEs still have a way to go to achieve the Commission’s digitalisation target of 
75% of EU companies  using  Cloud/AI/Big  Data in  their operations and 90% of 
SMEs achieving ‘at least a basic level’ of digital intensity.399  

734.  Currently400, 49% of SMEs have a labour force where more than 50% of employees 
use computers with access to the internet for business purposes (compared to 58% 
of large companies); 40% of SMEs use cloud service (compared to 72% of large 
companies); 37% of SMEs have Enterprise Resource Planning (ERP) software to 
share information  between different  functional  areas  (compared to  81%  of large 
companies); 28% of SMEs use Internet of Things (IoT) (compared to 48% of large 
companies),  and  7%  of  SMEs  use  AI  technology  (compared  to  28%  of  large 
companies). 

395 COM(2023) 168 final 
396 Taken to mean the ability of a business to utilise digital tools and working methods and operate inside a 
wider digital economy. 
397 https://digital-strategy.ec.europa.eu/en/activities/digital-programme 
398  European  Commission,  2022.  Digital  Economy  and  Society  Index  (DESI)  2022.  Available  at: 
https://digital-strategy.ec.europa.eu/en/library/digital-economy-and-society-index-desi-2022 
399 European Commission, 2021. COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT,  THE  COUNCIL,  THE  EUROPEAN  ECONOMIC  AND  SOCIAL  COMMITTEE  AND 
THE COMMITTEE OF THE REGIONS: 2030 Digital Compass: the European way for the Digital Decade’. 
https://commission.europa.eu/system/files/2023-01/cellar_12e835e2-81af-11eb-9ac9-
Available 
01aa75ed71a1.0001.02_DOC_1.pdf 
400  European  Commission,  2022.  Digital  Economy  and  Society  Index  (DESI)  2022.  Available  at: 
https://digital-strategy.ec.europa.eu/en/library/digital-economy-and-society-index-desi-2022 

at: 

214 

 
 
 
735. 

In this context, the upcoming action plan on the 2023 European Year of Skills (part 
of the SME Relief Package) will include the establishment of ecosystem-specific 
skills academies seeking to equip the SME workforce for the digital transition.401 

736.  On  Digital  Skills,  the  approval  of  Resilience  and  Recovery  Facility  funds  is 
contingent on Member States allocating at least 20% to Digital objectives. Out of 
this, 17% is dedicated to digital skills development.402 

4. 

PROMOTING A CULTURE OF DIGITALISATION 

1)  Digital solutions are often already available on the market. Certain platforms include: 
a)  Automated  accountancy  programs403  generally  offer  a  holistic  overview  of  all 
payments, the ability to execute multiple payments in one ‘click’, the setting up of 
automatic periodic payments, and an integrated ability to dispute claims.404 These 
services can foster prompt payment by providing debtors and creditors with a clear 
overview of payment timelines. For larger businesses purchasing from SMEs, they 
can  also  increase  the  ease  at  which  payments  are  executed.  For  SMEs,  targeted 
digitalisation solutions can narrow the aforementioned potential gap between cross-
border-operating SMEs and domestic-operating SMEs resulting indirectly from the 
VAT  in  the  Digital  Age  reforms,  as  it  would  see  domestic-operating  SMEs 
digitalise, including vis-à-vis e-invoicing. 

b)  Supply-chain financing platforms405 connect businesses with financial institutions 
to provide financing based on the value of outstanding invoices. In a similar vein 
to  digital  accounting  solutions,  pushing  businesses  to  use  these  services  could 
reduce liquidity strains resulting from delayed payment. 

c)  Credit management platforms406 can help businesses to automate the credit check 
process,  assess  the  creditworthiness  of  a  potential  debtor,  and  set  credit  limits, 
which can help to reduce the risk of late or non-payment. 

2)  At MS level, interesting projects are already in place. The Kit Digital program e.g. is 
an  initiative  launched  under  Spain’s  2021-2025  SME  Digitalization  Plan  within  the 
wider  Digital  Spain  2025  Agenda.407  It  will  seek  to  bolster  digital  intensity  among 
SMEs through subsidising the adoption of available digital solutions for accounting, 
simplifying process management, and invoicing procedures. The project has a budget, 
financed  through  NextGenerationEU  funds,  of  EUR  3.067  million.  The  Digital  Kit 

401 European Commission, 2022. Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND 
OF THE COUNCIL on a European Year of Skills 2023. Available at: https://ec.europa.eu/info/law/better-
regulation/have-your-say/initiatives/13614-European-Year-of-Skills-2023_en 
402  European  Commission,  2022.  Digital  Economy  and  Society  Index  (DESI)  2022.  Available  at: 
https://digital-strategy.ec.europa.eu/en/library/digital-economy-and-society-index-desi-2022 
403 See, for instance, Yuki, https://yukisoftware.es/ 
404 Ibid. 
405 See for instance Coface, https://www.coface.com/ 
406 See for instance CreditSafe, https://www.creditsafe.com/be/en.html?sp=true 
407 Kit Digital, 2022. https://www.acelerapyme.gob.es/en/kit-digital 

215 

 
 
 
 
program  is  relevant  as  it  provides  targeted  digitalisation  support  at  the  level  of  an 
individual enterprise.  

3)  Also  at  EU  level,  there  are  projects  ongoing.  A  very  recent  example  is  the 
Entrepreneurship4all project408 – an e-learning platform helping SMEs to adapt to the 
current  context.  The  platform  works  as  a  hub  offering  valuable  and  educational 
material, including online courses, masterclasses, podcasts, videos, etc., that focus on 
four  pillars:  Entrepreneurship  Competences  (EntreComp),  Financial  Literacy, 
Sustainability Competences, and Digital Competences (DigiComp). 

5. 

DIGITAL GOVERNMENTS 

737.  The Commission wants to ensure the public sector is able to keep pace with new 
technologies  and  benefit  from  innovation.  The  digital  transformation  not  only 
offers opportunities to the private sector, but also to public services. Many public 
services have already digitalised their procedures and are using technologies such 
as artificial intelligence, blockchain and the Internet of Things to interact with their 
citizens. 

738.  The  Commission  supports  public  administrations  in  complying  with  the  public 
procurement  directive’s  e-invoicing  obligation  through  the  Technical  Support 
Instrument, managed by DG REFORM.409 

739.  A very promising initiative of the European Commission for a reinforced public 
sector  interoperability  policy  is  the  Interoperable  Europe  project  (led  by  DG 
DIGIT)410. In November 2022, the Commission proposed the Interoperable Europe 
Act  to  strengthen  interoperability  in  the  public  sector.  Interoperability  allows 
administrations to cooperate and make public services function across territorial, 
sectoral  and  organisational  boundaries,  while  those  administrations  remain 
sovereign actors at all levels of government. 

740.  Within this initiative, the Commission is currently elaborating a scoping exercise 
for a project on Real-Time Economy (RTE) in Finland and the Baltic states, which 
has the aim of simplifying and automatizing the reporting obligations, exchange of 
data between companies and public administrations, etc. with a focus on supporting 
SMEs in particular. 

741.  The goal of this ‘Real-Time Economy’ initiative is to create the conditions for a 
digital  economy;  a  system  where  all  business  transactions  are  based  on  digital, 
structured (machine-readable) information and processing. In a digital economy, 
all services are online and interoperate with each other. Key business data moves 

408 https://entrepreneurship4all.eu/ 
409  European  Commission,  Reform  Support:  Public  administration  and  governance.  Available  at: 
https://reform-support.ec.europa.eu/what-we-do/public-administration-and-governance_en#digital-public-
administration 
410 https://joinup.ec.europa.eu/interoperable-europe 

216 

 
 
 
 
 
entirely  electronically  and  in  real-time  within  companies  and  with  public 
authorities.  The  vision  is  to  create  a  national  ecosystem  for  businesses  that  is 
compatible with other countries, enabling in practice the single digital market. The 
system will enable online electronic invoices, receipts and business data to flow 
automatically, securely and in real time between the different actors. One of the 
main  building  blocks  covered  is  the  transfer  of  online  electronic  invoices.  This 
building block would be supportive for member states to fulfil transparency.  

742. 

In  the  context  of  the  September  2020  Capital  markets  union  action  plan411,  the 
Commission  and  the  OECD  are  working  together  to  develop  joint  ‘financial 
competence frameworks’412. These frameworks set out the knowledge, skills and 
behaviour  that  support  financial  well-being  and  can  be  used  by  national  public 
authorities  and  stakeholders  to  develop  policies,  programmes,  and  learning 
materials on financial literacy. 

743.  The  Commission  and  the  OECD  jointly  developed  a  financial  competence 
framework  for  adults  in  January  2022413.    The  Commission  helps  national 
administrations  to  diagnose  the  levels  of  financial  literacy  amongst  population 
target  groups  and  to  identify  and  address  the  needs  demonstrated  by  these 
diagnostics.  The  Commission also  supports  EU  Member  States  in  creating 
dedicated programmes for improving financial literacy and education. A financial 
literacy supporting strategy is already available in Austria414. 

744.  Finally, the Commission is launching a pilot project to incentivise the uptake of 
ADR in the field of late payments, as an alternative to judicial dispute settlement. 
The project will also have a digital dimension. Next to making available standard 
clauses for mediation, creating a specialist mediation scheme in the construction 
sector  that  includes  training  of  mediators  and  awareness  raising  activities,  the 
project will also create and maintain content for a dedicated web section, containing 
all  necessary  information  on  the  advantages  and  disadvantages  of  alternative 
dispute resolution and providing a tool to find a suitable (and specialised) mediator 
in construction sector. The web section is thought to be an effective one-stop shop 
for information, including some standard contractual clauses. 

411  https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union/capital-
markets-union-2020-action-plan_en 
412  https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union/capital-
markets-union-2020-action-plan/action-7-empowering-citizens-through-financial-literacy_en  
413  https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union/capital-
markets-union-2020-action-plan/action-7-empowering-citizens-through-financial-literacy_en  
414  https://reform-support.ec.europa.eu/what-we-do/finance-and-access-finance/strategy-financial-literacy-
austria_en  

217 

 
 
 
W. ANNEX 23:   SUPPORTING INFORMATION  

Figure 22: Conditions more favourable to the creditor 

B2B: Maximum payment terms and conditions for the parties to agree on longer payment periods 
In  Denmark,415  Finland,416  the  Netherlands,417  and  Sweden,418  the  maximum  payment  term  is  30  days 
instead of 60. The purpose of such legislative intervention was to prevent the period of 60 days included 
in Article 3(5) LPD from becoming the de facto standard payment period.419 The parties, however, can 
agree upon a maximum payment term longer than 30 days, where they both expressly give their consent. 
These Member States do not allow ‘adhesion’ clauses420 setting out longer payment terms. Consequently, 
the business party with weaker bargaining power does not have to fear that clauses setting out payment 
terms longer than 30 days are unilaterally imposed by the counterparty with stronger bargaining power.421 
More recently, in July 2022, a new law entered into force in the Netherlands whereby payment terms in 
B2B transactions shall not exceed 30 days when the creditor is an SME, thus bringing down the initial 
payment term of 60 days in B2B transactions where the creditor is an SME. Similarly, in Belgium and 
Poland, payment terms shall not exceed 60 days when the creditor is an SME.  

B2B: Maximum payment terms that cannot be derogated by the parties 
The  French, Spanish and Croatian legislation goes further by limiting the maximum payment term. In 
France,422 the payment period agreed upon by the parties in a B2B contract cannot exceed 60 days from 
the date of issuance of the invoice. However, by way of derogation, the parties can agree on a maximum 
payment term of 45 days from the end of the month period (following the issuance of the invoice), if the 
term has been expressly stipulated in the agreement and is not grossly unfair to the creditor.423 Therefore, 
the maximum payment term is 75 days. Similarly, the Spanish legislator limits the parties’ autonomy by 
preventing  them  from  agreeing  upon  payment  terms  exceeding  60  calendar  days.424  In  Croatia,425 
undertakings can agree on a period of payment longer than 60 days (up to 360 days), provided that the 
debtor issued a security instrument with the legal effect of an enforceable title to the creditor. A payment 
period longer than 360 days would be null and void ex lege.  

B2B: Shorter payment terms established by law in absence of agreement between the parties 

415 Sections  3  (1)  and  (2),  and  Section  3a  of  the  Law  no.  459  (consolidated  version)  ‘Interest  Act’  -  IA 
(Lovbekendtgørelse om renter og andre forhold ved forsinket betaling (renteloven)), Official Law Gazette 
13 May 2014. 
416  Section  5  of  the  Act  on  payment  terms  for  commercial  contracts  (as  last  amended  in  2015  by  Act 
385/2015). See also Government Bill Proposal, RP 356/2014. 
417 Article 6:119a (5) of the Civil Code, as amended by Act of 13 December 2012 modifying Book 6 of the 
Civil Code and some other acts in relation to the transposition of Directive 2011/7/EU  
418 Section 2 a of the ‘Interest Act’ (Räntelag), SFS 1975:635. 
419 Petersen, L. L., Renteloven (4th ed, Karnov Group, Copenhagen, 2013) 141.  
420  An  adhesion  clause  is  a  contractual  clause  drafted  by  one  party  and  signed  by  another  party  which, 
typically, does not have the power to negotiate or modify the ‘imposed’ terms. 
421 Making the explicit consent of both parties a condition for validating payment periods longer than 30 days 
avoids situations where, for example, the debtor merely refers to its previously applied business practice. A 
limitation of this approach should be considered: in Member States where contracts can be entered into orally 
(e.g. in Denmark) determining what is needed to establish that a creditor has ‘expressly’ accepted a payment 
period longer than 30 days is left to the interpretation of the courts (Morten Qvist Fog Lund, ‘Ny lovgivning: 
Implementering af Late Payment direktivet i Danmark’, (2013) 1-S Erhvervsjuridisk Tidsskrift 43, 44.). 
422 Commercial Code of 18 September 2000, Official Journal of the French Republic of 21 September 2000, 
as last amended by Law n° 2008-776 of 4 August 2008. 
423 Article L. 441-6, I, Section 9 of the French Commercial Code. It implies that the maximum payment term 
is, therefore, up to 75 days (if the invoice is received the first day of the month and is paid 45 days from the 
end of the month). 
424 Article 4 (3), Act on Late Payment in Commercial Transactions (ALCPT). 
425 Article 11(2) of the Act on Financial Operations and Pre-Bankruptcy Settlement, (Official Gazzette no. 
108/2012. 

218 

 
 
 
 
 
According to the LPD, where the parties to a B2B transaction did not agree upon a specific date or period 
for payment in their contract, a payment term of 30 days applies ex lege (Article 3(3)(b) LPD). Three 
Member States (Austria, Bulgaria and Germany) have adopted a different approach if the parties did not 
agree upon a payment term:  
1) 
2) 

the payment must be paid ‘without any undue delay’ (Austria);426  
the standard payment term is 14 days from the date of receipt of the invoice or, alternatively, from 
the date of delivery of the goods/provision of services, or from the expiry of a specific term agreed 
between the parties (Bulgaria);427  
the  payment  is  immediately  due  on  receipt  of  the  invoice,  on  the  condition  that  the  creditor  has 
fulfilled all its contractual and legal obligations (Germany).428.  

3) 

G2B: 60 days payment term by public entities in the healthcare sector  
Ireland and the Netherlands did not include in their national transposition laws the possibility to extend 
payment terms to 60 days for  public entities providing healthcare. In addition, France has limited this 
possibility of extension to 50 days instead of 60 days 

G2B: Faster-than-30 days payments in the public sector (other than healthcare) 
In  Ireland,  the  government  requires  that  all  central  Government  Departments,  the  Health  Service 
Executive,  the  local  authorities  and  all  other  public  sector  bodies  (excluding  commercial  Semi-State 
bodies)  pay  their  suppliers  within  15  calendar  days  of  receipt  of  a  valid  invoice.  SMEs  can  attach  an 
Official  Notice  429of  the  15-day  prompt  payment  requirement  to  relevant  invoices.  Small  businesses 
themselves should refer instances of non-adherence to the relevant Government Department, public sector 
body and State Agency. 

All transactions: EUR 40 compensation  
In Ireland and Poland, the lump sum compensation for recovery costs varies according to the value of the 
invoice. For example, in Ireland, for example, the flat fee compensation is regulated as follows: €40, for 
invoices not exceeding €1000; €70 for invoices exceeding €1000 but not exceeding €10.000; €100 for 
invoices exceeding €10.000.  

426 Sections 904, 907a, and 1334 of the General Civil Code (Allgemeines bürgerliches Gesetzbuch – ABGB), 
JGS Nr 946/1811 as amended by Federal Law Gazette published on 9 August 2002, BGBl I 118/2002. 
427 Article 303a, Sec. 3 Commerce Act, ‘Bill for Amendment and Supplementation of the Commerce Act’ 
(Закон за изменение и допълнение на Търговския закон), State Gazette issue 20 of 28 February 2013, in 
force as of 4 March 2013. 
428  Article  271  Paragraph  1  of 
at  https://www.gesetze-im-
the  Civil  Code, 
internet.de/englisch_bgb/englisch_bgb.pdf.  The  German  provision  does  not  imply  that  the  debtor  is 
automatically on delay once he has received the invoice by the creditor. The receipt of the invoice represents 
only the date starting from which the payment is due (if no other agreement has been reached by the parties 
in this respect). 
429 Prompt Payment Official Notice Reminder - DETE (enterprise.gov.ie) 

available 

219 

 
 
 
 
 
 
 
 
 
X.  ANNEX 24: MONITORING AND EVALUATION OF IMPACTS 

745.  The impact of the EU’s action in the form late payment measures as set out in the 
proposed option in this impact assessment should be assessed 4 years after entry 
into  force  of  the  adopted  instrument.  The  evaluation  will  include  consultations, 
whose questionnaires should provide comparable results with those obtained for 
this  impact  assessment.  The  evaluation  should  take  the  form  of  a  European 
Commission report to the legislator. 

746.  The monitoring arrangement accompanying the EU framework should enable the 
gathering of ‘hard data’ and information on late payment performance. This could 
cover both the observance of the limits established regarding the payment terms for 
B2B, as well as enforcement bodies and means of redress. In addition to the overall 
reduction in the scale of late payment practices, to be reviewed under the general 
objective,  the  individual  policy  measures  proposed  could  be  both  monitored 
through the existing EU Late payment observatory and evaluated. The observatory 
could  gather  companies’  views  about  the  effectiveness  and  efficiency  of  policy 
measures proposed for each specific objective, e.g. the introduction of a cap in B2B 
transactions.  

Specific objectives 

Source 

Indicators 

Prevent  late  payments 
establishing 
by 
payment 
maximum 
in  B2B  and 
terms 
automatic  payment  of 
interests 
and 
compensation 

•  Annual  survey 
to undertakings 

•  Members 

States annual 
reports 
•  Late Payment 

Observatory 

•  Alignment of application of UTP rules (e.g. 

number of changes to national rules with a view 
to approximate practices)  

•  Number of payments that do not comply with 

the EU rules 

•  Number of interests and compensations paid (as 

percentage of late payments) 

Foster timely payments 
by enabling effective 
redress 

•  Members States 
annual reports 

•  Eurostat / 
national 
statistics / EU 
and national 
market 

•  Number of complaints received (anonymously 

or not) 

•  Number of mediation meetings, if applicable 
•  Number of investigations launched (own 

initiative or upon request)  

•  Share of cases resulting in findings of an 

infringement 

•  Share of cases using alternative dispute 

resolution mechanisms 

220 

 
 
 
 
 
 
 
Y.  ANNEX 25: OVERVIEW OF BENEFITS AND COSTS FOR 

BUSINESS AND FOR PUBLIC AUTHORITIES 

For assumptions and calculations please refer to Annex 4. 

Table 14: Summary of Economic impacts on businesses 

Benefits for businesses 

Costs for businesses 

Cost  to  debtors  of  paying  on  time 
by  requiring  additional  financing: 
one-off  cost  of  dealing  with  the 
bank and recurring costs related to 
interests  (but  likely  cheaper  than 
implicit 
they  are  paying 
currently) 

rate 

PO1 (across all 
sub-options) 

Capping  verification  time  avoids 
circumvention of payment terms 

Reduced  negotiation 
around 33% of SMEs 

times 

for 

Access to financial literacy training 
worth EUR 200-1800 per SME 

Reduced  hassle  costs  associated 
with chasing late payments ( based 
on  the  assumption that  an  average 
company spends  5 person-days  on 
chasing debtors) 

PO1a 

PO1b 

PO1c 

Reduction  in  payment  delays  of 
23.4% for the average EU company 

One-off  adjustment  cost  of  EUR 
56.1 million 

Reduction  in  payment  delays  for 
14.4% of EU companies 

One-off  adjustment  cost  of  EUR 
35.0 million 

Reduction  in  payment  delays  for 
66% of invoices issued by 14.4% of 
companies 

One-off  adjustment  cost  of  EUR 
23.1 million; cost of verifying SME 
status of EUR 384 million 

PO2 (across all 
sub-options) 

automatic 

Automatic  payment  of  interests 
worth  up  to  EUR  265.5  million, 
of 
plus 
compensation 
to 
EUR 3.75  billion  (benefit  to  the 
creditor, cost to the debtor) 

payment 
fees  of  up 

Subcontractors in public payments 
to 
are  paid  promptly, 
estimated  unblocking  of  payments 
up to EUR 31 million per year 

leading 

Reduced  hassle  costs  associated 
payments 
with 

chasing 

late 

from 
One-off  adjustment  cost 
updating  standard  payment  terms 
of EUR 243 million 

Cost  to  the  debtor  of  automatic 
interest  (worth  up  to  EUR 265.5 
million)  and  compensation  fees  of 
up to EUR 3.75 billion 

Cost  to  debtors  of  paying  on  time 
by  requiring  additional  financing: 
one-off  cost  of  dealing  with  the 
bank and recurring costs related to 
interests  (but  likely  cheaper  than 

221 

 
 
 
Benefits for businesses 

Costs for businesses 

(currently  assumed  at  5  person-
days per company on average) 

implicit 
currently) 

rate 

they  are  paying 

from  verifying 
to 

Cost  to  main  contractors  in  public 
their 
contracts 
prompt  payment 
the  public 
authority (affecting around 173 000 
total  recurring 
companies  at  a 
administrative  cost  of  EUR  2.2 
million per year) 

Potential fines to debtors worth up 
to EUR 136.8 million 

PO2a 

PO2b 

PO3 

PO3a 

PO3b 

Strong  enforcement  accompanied 
by sanctions and fines, estimated to 
reduce payment delays by 17.8% 

Deterrent from enforcement bodies 

States 

Avoiding  court  cases  thanks  to 
specifically 
Member 
addressing unfair contractual terms 
and practices through their national 
law 

EUR  2.6  million  per  year 
recovered debt across EU-27 

in 

Cost savings of EUR 27 million per 
year from avoided court cases 

Reduction  in  payment  delays  of 
5.5% 

222 

 
 
 
 
 
 
 
 
 
 
 
Table 15: Summary of Economic impacts on public authorities 

Benefits for public authorities 

Costs for public authorities 

PO1 (across all 
sub-options) 

Indirect  effects  of  reduced  late 
payments  on  bankruptcies  and 
employment 

Negligible  administrative  costs  as 
capped  payment 
terms  concern 
B2B transactions 

Negligible  administrative  costs 
from verification procedures within 
30 days 

Some  adjustment  cost  to  provide 
access  to  financial  literacy  and 
credit  management 
training, 
depending  on  how  Member  States 
choose to structure their support in 
compliance with state aid rules 

PO2 (across all 
sub-options) 

Improved execution of public work 
projects  through  prompt  payment 
of subcontractors 

Public  authorities  have 
to  pay 
interest  and  compensation  fees  to 
public contractors when paying late 

PO2a 

PO2b 

PO3 

PO3a 

PO3b 

fines 

Regulatory 
imposed  on 
debtors of up to EUR 136.8 million 
per year for the EU-27 

Cost  of  designating  national 
enforcement  bodies,  estimated  at 
EUR 60-65 million per year for the 
whole EU-27 

Cost  of  designating  national 
enforcement 
without 
sanctioning powers 

bodies 

Reduced burden on judicial system 
through avoided court cases 

Limited  one-off  costs  on  Member 
States  to  specifically  address  the 
question of unfair contractual terms 
their 
and 
applicable  national  law,  covered 
under 
“business-as-usual” 
scenario 

practices 

through 

a 

Cost  of  running  national  payment 
envoys,  estimated  at  EUR  11.8 
million per year for the whole EU-
27 

Cost of running mediation system, 
estimated at EUR 10.8-39.8 million 
per year for the whole EU-27 

Public  authorities  can  cheaper 
solve  their  own  disputes  through 
mediation services instead of being 
taken to court 

223 

 
 
 
 
 
224