The time it takes to pay an invoice has a direct impact on a company's cash flow. A debtor's failure to pay on time can lead to organizational disruption, and even major financial difficulties. That's why legislation regulates payment terms between professionals. The health crisis has led to a sharp downturn in business, with some companies unwillingly deferring payment of their invoices. This change in behavior, which created tensions between suppliers and customers, is now tending to return to normal. In fact, the Banque de France notes that inter-company payment terms have been falling since the end of the Covid-19 crisis.
Payment terms between professionals
The French Commercial Code specifies the conditions for payment of a sum due. The legal period is 30 days following the date of acceptance of a product in the case of a sale, or following the date of completion in the case of a service.
A period of 45 days from the date of issue applies to invoices issued periodically.
However, in the case of a transaction between professionals, it is possible to choose between 4 different deadlines.
- cash payment: invoicing with immediate payment of the full amount due,
- payment on receipt: payment on receipt of invoice, 7 days maximum,
- payment by default: 30 days end of month, unless otherwise stated on the invoice,
- payment with negotiated terms: terms are specified in the General Terms and Conditions. Payment terms may be up to 60 days.
Specific deadlines have been set for certain sectors, such as food, beverages and transport, and for seasonal activities.
What happened during the Covid-19 crisis?
Repeated confinements have led to a significant lengthening of payment terms. This is due to the fact that companies, particularly those with fewer than 10 employees and in sectors most affected by the crisis, have experienced payment difficulties due to falling sales.
A crisis committee on payment times was set up in March 2020 to study behavior in this area by surveying 600 diverse companies. Among other things, the committee noted exaggerated validation times after work had been completed.
The trend since the end of the health crisis
The problem of missed payment deadlines seems to have eased in most sectors, with the exception of the hotel and catering industry, where an average 7-day increase was recorded.
In 2021, those who failed to pay their bills on time were also those most exposed to pandemic-related restrictions. In addition to accommodation and catering, these include travel agencies, air transport and artistic activities.
On the other hand, SMEs generally pay their suppliers within 60 days, unlike large companies, where fewer and fewer pay within 60 days (only 39%). It has to be said that this approach is advantageous. They are said to have benefited from acash surplus of 16 billion euros. 10% of them have been targeted by the Banque de France for excessive payment delays.
Nevertheless, we can take heart from thegeneral fall in supplier payment times in 2021, which were down by one day on 2020, while customer payment times were down by 1.2 days. Logically, 2022 should see a continuation of this downward trend.
In 2021, payment times for companies 🇫🇷 fall again.
- Banque de France (@banquedefrance) January 23, 2023
SMEs remain the best performers in terms of payment times - they are also the category of#business most penalized by delays. #BdFeco 👇