A new proposal by the European Commission for a Regulation on payment terms that removes the ability for companies to agree payment terms beyond 30 days could 'severely affect' the retail and wholesale sector, EuroCommerce has warned.
According to the Commission, the Late Payment Regulation would seek to address 'asymmetries in bargaining power between a large or more powerful client (debtor) and a smaller supplier (creditor)'. It noted that one in four bankruptcies are due to invoices not being paid on time.
According to EuroCommerce, the Regulation would interfere with the established practices of retailers and wholesalers, who rely on 'negotiating payment terms that offer advantages to all parties', such as for products that sell over longer periods, or seasonal products.
'The Wrong Answer'
“We support a culture of prompt payment in Europe, but restricting payment terms to address late payment issues is the wrong answer to a real problem," commented Christel Delberghe, director general at EuroCommerce.
"Agreeing payment terms with suppliers is a crucial element of commercial negotiations. Taking away the chance for buyers who operate with low margins to make sales over a period of time to meet their costs risks distress rather than relief."
'Mutually Beneficial Agreements'
A strict 30-day term would 'deprive businesses of the flexibility to enter into mutually beneficial arrangements', EuroCommerce said, with the retail and wholesale sector, which has to order goods months in advance before selling them, relying on the ability to freely negotiate payment terms.
'This proposal will have a significant impact on the competitiveness of one of Europe’s essential ecosystems and its contribution to local jobs and communities,' EuroCommerce added. 'It will limit retailers’ and wholesalers’ ability to offer choice and good prices to consumers.'