Based on a commitment in the Small Business Act, the European Commission (EC) suggested on April 8 a new policy approach to tackle the situation on late payments and has proposed substantial changes to the late payment directive of 2000, since late payments in commercial transactions between companies or between businesses and public authorities still happen in the EU.
Accordingly, the EC suggested that public authorities should lead by example and should pay their bills within 30 days, "as a rule". In parallel, the EC has committed itself to speed up payment of goods and services so to fully respect the targets for paying bills and, in a number of cases, even shortening payment times to under the current legal period.
The proposed changes reflect the importance of timely payments to businesses, and especially to small and medium sized enterprises.
Furthermore, this proposal aims at improving the cash flow of European business which is particularly important in times of economic downturn. It also aims at facilitating the smooth functioning of the internal market via the elimination of related barriers to cross-border commercial transactions.
It will achieve this by providing creditors with instruments that enable them to fully and effectively exercise their rights when paid late and by confronting public administrations with measures that effectively discourage them from paying late.