Believe it or not, accounts payable can be a political hot potato. Later this month [March 2013], EU rules governing late payment are set to be introduced across European member states. The new rules follow a campaign by the European Commission which points out that viable companies can go to the wall while waiting to get paid.
In practical terms, Directive 2011/7/EU means buyers cannot increase their standard terms of business to allow for longer payment terms during tough times. Businesses will have to pay their invoices within 60 days, unless suppliers expressly agree otherwise and if it is not grossly unfair.
The new rules also say that public authorities will have to pay supplier invoices within 30 days or, in very exceptional circumstances, within 60 days.
Suppliers will automatically be entitled to claim interest for late payment and will also be able to obtain a minimum fixed amount of €40 as compensation for recovery costs. They can also claim compensation for all remaining reasonable recovery costs, according to the new law.
Similarly in the UK, accounts payable is on the political agenda. In 2011, Cabinet Office minister Francis Maude announced that he expected government contractors to pay their suppliers within 30 days, or risk being named on a ‘mystery shopper’ website.
The move was part of a government plan to alleviate pressure on SMEs as they suffered from a period of severely restricted bank lending. But it could apply to any business working with the government and shows how the law and public perception can damage your business if accounts payable is not managed efficiency and transparently.
In my next blog I will discuss how to ensure compliance with various laws, guidelines and policies.