How do SMEs react when they have late payments?

According to Intrum’s European Payment Report, the average percentage of companies in Europe that opt ​​for bad debt management companies, when one of their customers are late in paying invoices is 17%, compared to 19% in Spain. However, there are still many companies that opt ​​directly for other measures such as legal proceedings (62%) or implementing internal recovery processes (22%).

On the other hand, 46% of Spanish companies would be in favor of introducing new legislation to solve the problem of late payments. The defaults are one of the biggest economic challenges for the business sector. In fact, according to data from the European Commission, more than 60% of companies in the European Union still do not collect their invoices on time, a situation that particularly affects SMEs and that requires immediate actions to prevent this
delay becomes a permanent debt.

One of the most effective solutions is to rely on companies specialized in debt management, in charge of offering a professional service throughout the entire recovery process. (friendly and judicial phase), achieve the best results and consolidate the relationship with the client, also allowing the company to focus on what is most important: boosting its business.

In this sense, according to the report, currently, one in five Spanish companies (19%) is committed to this support and advice. At a European level, the percentage of organizations that considers this solution is 17%. For its part, among the 29 countries surveyed, Switzerland (24%), Portugal (22%) and Belgium (21%) are the nations where more companies opt for professional management, while Austria (12%), Estonia (12%), Greece (11%) and Croatia (10%) They are the countries with the smallest number of entities that opt ​​for this alternative.

recovery process

Despite the effectiveness of this measure, there are still many other companies that decide not to resort to professional intermediation and start their own the recovery process, either betting through the courts directly or carrying out internal recovery processes.

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Thus, as reflected in the study prepared by Intrum, when reacting to non-payment, the judicial route is the most used alternative. In fact, 62% of Spanish organizations directly choose to take legal action when they experience delays from a client, a percentage that is five points above the European average (57%) and that places Spain as the third market in Europe with the highest percentage of companies taking legal action directly, behind only France (65%) and Poland (63%). On the other hand, Ireland, Serbia, the United Kingdom (all three with 51%) and Bulgaria (49%) would be the countries where fewer companies use this measure.

Likewise, as the second most chosen alternative, the Intrum study shows that 22% of Spanish companies also choose to implement internal recovery processes, a figure that rises to 29% in the case of the European average.

Companies want solutions to reverse payment delays

The introduction of new legislation would be, in this case, the favorite alternative for the business network to solve the problem of non-payments: according to the European Report on Payments, 46% of companies would be in favor of promoting more effective regulation.

However, as the Intrum data shows, this would not be the only measure that would have the approval of the companies, also proposing other solutions such as setting the payment conditions by law (42%), greater transparency around corporate payment behavior (32%) or improving the application of the
current legislation (30%).

Therefore, the need to introduce improvements in the regulation against defaults is a common opinion among companies and institutions. In this sense, the European Commission is working on updating its regulations on late payment, which is currently in the public consultation phase, with the aim of promoting a definitive change towards a business culture of payments without delays.

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