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Covid-19: why very small businesses have become bad payers

Published on February 23, 2021 by Pierre Belhache - 3 mins reading time
Bank watch Banque de France
According to the first quarterly barometer commissioned from the BVA institute by the crisis committee on payment times, small and medium-sized businesses, which are experiencing numerous difficulties due to the health crisis, are taking longer to pay their suppliers, and have thus become bad payers.

A survey of 600 companies

To observe and prevent the lengthening of payment times, which represent a significant source of financing estimated at 700 billion euros, a crisis committee on payment times was set up in March 2020 by the Governor of the Banque de France and the Minister of the Economy and Finance.

Chaired by Frédéric Visnovsky, the French National Credit Ombudsman, and Pierre Pelouzet, the French Business Ombudsman, the crisis committee regularly intervenes to put an end to repeated late payments or, on the contrary, to distinguish companies with good practices.

An initial quarterly barometer has been commissioned from the BVA polling institute, and will be repeated quarterly throughout 2021. It is based on a representative sample of 600 companies with 0 or more employees, interviewed by telephone between December 7 and 18, 2020.

"Compliance with payment deadlines is an essential issue for small and medium-sized businesses. This is true in normal times, when they are already affected by significant payment delays, and it is obviously exacerbated by the current economic context", recently declared Alain Griset, Minister in charge of SMEs. " If we are to take effective action to support these small and medium-sized businesses, we need to be able to accurately measure the difficulties they may encounter", he stressed.

Confinements lengthen payment times

81% of the business leaders surveyed by BVA pointed the finger at companies with fewer than 250 employees as being responsible for late payment. According to these business leaders :

  • only 19% of delays are caused by companies with more than 250 employees,
  • compared with 27% for companies with 10 to 249 employees
  • and 54% for companies with fewer than 10 employees.

According to the crisis committee, this is due to the fact that most French companies have very small and medium-sized businesses as customers or suppliers, particularly in the sectors most affected by the health crisis.

What's more, these small businesses have themselves been subject to late payments (43 days on average in 2020), which has impacted their cash flow, as confirmed by a study by the Observatoire des TPE published at the beginning of February.

While the situation seems to be improving, with 8 out of 10 companies reporting that they have returned to payment times similar to those prior to the start of the pandemic, 16% say that payment times lengthened in November 2020 compared to the previous month. Confinements therefore have a significant impact on the lengthening of payment times.

Other problems have become more acute:

  • failure to issue purchase orders after a service (+9%),
  • unilateral modification of an element of the contract (+8%),
  • or excessive delays in validating work performed (+8%).

"The Banque de France will be stepping up its vigilance with regard to payment terms in its corporate rating activity," declared Banque de France Governor François Villeroy de Galhau, on the publication of the barometer.