Owners of small to medium sized companies (SMEs) will no doubt already have faced this situation: you get the opportunity to work with a large corporate, but often these big companies want a discount for paying within 30 days. Or they even insist on having a contractual payment term of 60 days.
Moreover, companies of any size can deviate from the legal payment term of 60 days and this means that payment terms of 90, or even 120 days, are sometimes included in contracts. So what do you do? Should you turn down a lucrative deal because of the payment term or do you take the risk that you may also have to pay your own invoices later than usual?
Since 1st July, 2017 the law dictates that large corporates have to pay smaller (SME) companies within 60 days. At first this appeared to be good news: payment terms did indeed become shorter. But in the meantime payment terms have increased again up to more than 40 days, even though the economy is improving. It’s not even worth thinking about how long you would have to wait for your money if the economy worsened! When introducing this law, the Ministry of Economic Affairs and Climate was already afraid that this 60-day term ruling would lead to longer payment terms.
For SMEs, this legal payment term of 60 days is becoming a problem: the timing of their purchasing very often depends on when they will receive their money. You can’t spend money that you don’t yet have. In an earlier blog we wrote about how difficult it is for SMEs to obtain finance, so this just adds to the liquidity problems, and borrowing money only increases costs.
A law to reduce payment terms to 30 days would be a very welcome change for SMEs. Government departments already have a 30-day payment term, whereas in the past they were known for being late payers. So it is possible!
On the 23rd April, MKB-Nederland (an organisation that supports SMEs in the Netherlands) wrote a letter to Mona Keijzer (the Secretary of State for Economic Affairs and Climate) about this very problem.
At the time of writing this blog, Mona Keijzer has pledged that she will meet this wish: she endorses how important it is for SMEs to be able to quickly receive the money they are owed for their products or services. There was already a plan to assess the payment term legislation for large corporates in the summer of 2019. If this evaluation indeed shows that it is now normal for payments to take up to 60 days, the Secretary of State will use this fact to change the law, amending it to 30 days.
No matter what, at Togather we always say: when you do business with us, you are sure of getting your money!