According to the latest European Payment Report from Intrum, 72% of Spanish SMEs are accepting longer payment terms than they would like due to the inability of their clients to pay their invoices on time.
The impact of the health crisis continues to affect the businesses of thousands of companies that are facing problems with their pending payments. This is leading to the fact that it is increasingly common to request payment extensions and that many SMEs view pending payments from some clients with concern.
As is clear from the Intrum report, this is leading to large corporations being the ones that are making the most requests for expansion of payments made to SMEs, in 44% of cases, followed by SMEs, with 42%, and the public sector, with a 10%.
Similar percentages if the larger entities that have received requests of this type are analyzed, and that 80% have been in the position of responding to this need. In this sense, 45% of the requests received came from large corporations, while 43% were from SMEs and 12% from public sector companies.
According to the report, although the number of companies that are extending the payment terms stipulated by contract is still high, the figure is better than that of 2020, when the proportion of SMEs that received these requests was 18 percentage points higher, reaching 90% and, in the case of large corporations, it reached 89%, nine points more.
The expansion of payments, below the European average
Although the extension of payments is being the solution of many companies to save time and pay later, with the relief that this supposes at an economic level, for SMEs it is a worrying point since 63% do not trust the ability to pay of those clients who have outstanding debts.
And, given the uncertainty of the moment, the situation does not seem to evolve positively in the coming months since 65% of SMEs believe that the risk of non-payment will grow in the short term. Consequently, and in the face of this growing mistrust, half of the companies surveyed in this study consider that the risk of non-payment could soon increase.
However, despite these figures, there is a positive note: these percentages are, albeit very slightly, below the European average, which is 66%, and as one of the markets in which fewer organizations state that the risk of default will grow soon.
Specifically, Spain is only three points behind the United Kingdom, Germany and Ireland, in which 62% of the SMEs surveyed see that the pending payment of their clients is in danger. Portugal, France and Italy are also very close with a percentage of 63%.
All these data show that the Spanish business fabric, like a large part of Europe, continues to face the impact of the health crisis. The approval of the 140,000 million euros in aid from the Next Generation EU Funds, is a measure that seeks to alleviate this complicated situation. To this are also added proposals such as the new ‘Create and Grow’ Law which establish that companies that do not meet the agreed payment terms will not be able to receive any type of aid or public subsidy, also seeks to contribute to this objective.
However, the uncertainty of the moment makes it more necessary than ever for SMEs to take maximum precautions and establish a plan that helps them secure their clients’ payments to avoid liquidity risks.
Requiring payment in advance or credit checks can be some measures that help eliminate that worry of possible defaults in a difficult economic time.