Reading time : 7 min
Written by Florian Masseube
For many thriving companies, innovative start-ups, everything seems to go well until the day a major client delays payment. One month passes, then two, then three… Invoices pile up, cash flow collapses, and the bank starts calling. In a few weeks, what was just a simple payment delay becomes a risk.
Invisible at first glance, payment delays gradually suffocate businesses, especially micro and small enterprises. In France, an average payment delay of 12 days amounts to 19 billion euros tied up each year in companies' accounts, according to the Payment Delay Observatory.
Why does this problem persist despite regulations? How does France compare to the rest of Europe?
Regulation in France and Europe: strict laws, but still too little enforcement
In the face of the risks that payment delays pose to the economy, France and the European Union have established strict regulations aimed at framing practices and protecting businesses.
1. French legislation: clear rules, but still insufficient enforcement
In France, the law imposes maximum payment deadlines, defined by the Commercial Code :
- 60 days from the date of invoice issuance
- 45 days end of month in certain specific cases (specific sectors or particular agreements)
In case of exceeding, penalties are applied.mandatory late penalties apply (minimum rate = ECB base rate + 10 points). In theory, this should deter late payers, but in practice, few companies dare to claim these penalties for fear of losing an important client.
Moreover, the DGCCRF (General Directorate for Competition, Consumer Affairs and Fraud Control) monitors these violations and can impose financial sanctions of up to 2 million euros. However, inspections remain limited and large companies often find ways to circumvent the law.
2. European regulation: a desire for standardization and strengthening
The European Union adopted in 2011 the directive 2011/7/EU on payment terms, which imposes similar rules on businesses and public administrations across all member states. Its main measures include :
- A maximum payment term of 30 days for transactions with the public sector (except for exceptions that can go up to 60 days).
- Automatic compensation for creditors in case of delay, with mandatory late interest (at least 8% above the ECB base rate).
In September 2023, the European Commission proposed a stricter regulation aimed at reducing the maximum payment term to 30 days for all transactions between businesses. This project aims to protect SMEs, which particularly suffer from the abuses of large companies.
However, it is noted that payment delays persist. Companies hesitate to assert their rights and sanctions are not always applied rigorously.
Dans la suite de cet article, nous allons explorer l'impact direct de ces délais sur les TPE-PME, les conséquences pour l’ensemble des entreprises et les initiatives comme le label Positive Company, qui encourage des pratiques de paiement plus responsables.
Impact of payment deadlines on micro-SMEs
In France, granting payment deadlines is a common practice, adopted by 97% of companies, across all sectors and sizes. The average deadline is 51 days, a figure higher than that observed in Germany (32 days) or Poland (42 days).
Average payment deadline
Payment delays are also frequent: 85% of French companies have experienced delays in the past 12 months. Micro-SMEs are particularly vulnerable, with 73% of them observing an extension of these delays, compared to 55% for mid-sized and large companies. The average delay reaches 42 days for micro-SMEs, 38 days for SMEs, and 26 days for large companies.
These delays have significant consequences on cash flow: more than half of micro-SMEs believe that payment delays have a "very important" or "critical" impact on their cash flow. This situation can lead to payment difficulties towards their own suppliers, creating a potentially devastating domino effect.
Consequences for all companies
Beyond micro-SMEs, the extension of payment deadlines affects the entire economic fabric. In 2024, 39,506 business failures were recorded in the first seven months of the year, an increase of 23% compared to 2023 and 26% compared to 2019.
The automotive, energy, pharmaceutical, agri-food, financial services, and construction sectors are particularly affected, with more than 25% of companies reporting delays of more than two months in these areas.
L'importance accordée par le label Positive Company aux délais de paiement
The RSE Positive Company® label pays special attention to companies' payment practices. During the labeling process, anonymous surveys are sent to stakeholders, including suppliers, to assess the CSR approach of the companies being labeled and include compliance with payment deadlines.
This approach highlights the importance of honoring financial commitments in corporate social responsibility. By integrating these criteria, the label encourages companies to adopt ethical business practices, thereby strengthening trust and collaboration with their partners.
Conclusion
Managing payment deadlines is essential to ensure the financial health of companies, especially small and medium-sized enterprises. Adopting responsible payment practices contributes not only to the stability of business partners but also to the overall economy. CSR labels, such as Positive Company®, play a key role in promoting and encouraging these virtuous behaviors.
Sources
- Observatory of payment deadlines : The 2023 annual report provides detailed data on payment deadlines in France, including average delays and their impact on different sizes of companies - banque-france.fr
- Directive 2011/7/EU of the European Parliament and of the Council : This European legislative text establishes measures to combat payment delays in commercial transactions within the European Union - legifrance.gouv.fr
- European Commission : The Commission proposes a regulation aimed at reducing payment deadlines, with detailed explanations of the proposed measures - ec.europa.eu
- Deloitte Lawyers : An in-depth analysis of the European Commission's proposals to combat payment delays, including the main proposed changes - blog.avocats.deloitte.fr
- Ministry of Economy, Finance and Industrial and Digital Sovereignty : Press release on the submission of the 2022 annual report of the Payment Delays Observatory, providing recent statistics and official comments - presse.economie.gouv.fr
- Le Monde : Article detailing the extension of payment deadlines and its consequences on the cash flow of French companies, with recent data and analyses - lemonde.fr