It is not the main reason, but it is one of the reasons for the existence and rise of electronic invoicing. We are talking about late payments. This is a concept that has always existed and that all governments have tried to combat in different ways. The good news is that now, with digital transformation of this new era, the tools available to companies and authorities are much more effective. Easyap software is one of them, so as experts on the subject, we would like to take this opportunity to analyze late payments in Spain. We will tell you how executives and politicians are trying to combat it and the role of electronic invoicing in this fight.
What do we mean by delinquency and what consequences can it have?
Delinquency is a concept that is legally defined. It refers to when a buyer fails to meet their payment obligations in terms of timing, form, and/or amount. This may be due to negligence, ignorance, or any other reason. But the truth is that from the moment the non-payment occurs, the debtor or defaulter will have to face a series of consequences , administrative, social, or even criminal consequences, such as:
– Fines and penalties of varying amounts.
– Seizure and loss of real estate or assets that guarantee certain transactions.
– Bad reputation and inclusion in delinquency files.
– Difficulty obtaining financing from banks and credit institutions and to contract utilities such as water or electricity for a business.
– Criminal convictions that can lead to prison sentences.
In turn, the concept of delinquency is applicable to any field. Of course, just because someone is delinquent does not mean that they will not pay what they owe, but rather that they have not fulfilled the conditions agreed upon in the contract. The good news is that electronic invoicing, as we will discuss later, has arrived to combat late payments in Spain and the rest of the world very effectively.
The situation of late payments in Spain
At easyap, we are experts in electronic invoicing and work on international projects. We develop solutions for companies from different parts of the world. However, we are very familiar with the national business landscape. That is why we want to analyze late payment practices in Spain.
Following the economic crisis, late payments in our country had been declining in recent years, thanks in large part to policies such as the Create and Grow Law. However, in 2022, they began to rise again, apparently as a result of COVID-19. Therefore, there are still significant challenges in debt management and the prevention of delinquency.
In this regard, the Bank of Spain notes that, in the financial sector, delinquency in Spain in 2022 stood at 6.4%. This figure represents an increase from the years prior to the pandemic and compared to 2012 (5.3%). Here you can see how delinquency has evolved in Spain with data updated over several decades.
But... What is the delinquency rate?
Precisely, the delinquency rate, although is an indicator specific to the financial world, it serves as a reference for other sectors. It is used to measure the proportion of loans that have not been repaid on time in a given period. To calculate it, the total value of delinquent loans is divided by the total value of outstanding loans.
Likewise, the delinquency rate reflects the solvency and purchasing power of companies. A high delinquency rate may indicate a difficult economic situation and greater uncertainty in the future, which can have a negative impact on investor confidence and economic growth.
Evolution of the delinquency rate in Spain
But, returning to the situation of national delinquency, let's see how it has fluctuated over time. Taking 1981 as the starting point, which is when the first data was collected, the evolution of delinquency in Spain has had the following milestones:
– The 1980s was a period in which the delinquency rate fluctuated between 3.3% and 4%.
– Between 1991 and 1994, the default ratio shot up from 4% to 9%, reaching 9.15% in February 1994.
– From then until June 2000 2000, there was a gradual decline in the default rate, which fell to 1.28%.
– Between 2000 and 2007, a period of economic prosperity for Spanish companies, the ratio fluctuated between 0.8% and 1%.
– From January 2008 to December 2013, due to the economic crisis, we experienced a sharp and steady increase to 13.62%.
– Since then, it has been gradually declining until 2022, when a change in trend and a rebound were recorded.
Therefore, significant challenges remain to be addressed in order to ensure a healthy and stable economy.
Spain's situation compared to other EU countries
In this regard, Spain is not alone in implementing policies to combat late payment. The EU and its members have been studying for years how to combat this problem that affects all industries.
It is difficult to directly compare delinquency rates between countries due to differences in financial systems and measurement methodologies. This is even more difficult if we do not include countries outside the EU. However, according to the delinquency rate of financial institutions reported by the Bank of Spain, Spain is not among the countries with the highest ratios internationally.
In the EU, the delinquency rate varies significantly. This is because it is an indicator that depends on factors such as economic health, consumer and business solvency, and the effectiveness of prevention and management policies. In general, countries such as Greece, Italy, and Portugal have higher delinquency rates than Spain. On the other hand, powerful economies such as Germany and Denmark have lower rates.
Even so, we insist that it is important to emphasize that this is a dynamic phenomenon and that rates may fluctuate over time depending on factors such as the economic situation and changes in financial policies. Therefore, it is necessary to closely monitor the evolution of delinquency at the national and international levels in order to take effective measures to prevent and manage them.
The Create and Grow Law to combat late payments in Spain
Returning to the specific case of Spain, the so-called Create and Grow Law. This is a regulation that, among other things, seeks to reduce late payments in the national business fabric. Specifically, it came into force in 2013, when the default rate in Spain was skyrocketing, and the results have been positive and noticeable.
At easyap, we have already discussed and explained what the Create and Grow Law is. Likewise, this regulation aims to promote economic growth and job creation in Spain. To this end, it is essential to put an end to late payments, which is why this law includes a series of regulatory and fiscal measures that mainly provide three benefits:
–– Improved access to credit by allowing Spanish companies to access a greater volume of credit. This, in turn, drives economic growth and reduces delinquency.
–– Simplification of debt restructuring processes. The law makes it easier for companies to restructure their debt.
– Introduction of mandatory electronic invoicing. This measure improves the traceability of tax transactions, both for companies and for the authorities.
These types of policies have succeeded in reducing the percentage, as shown by the delinquency data. However, companies have also been able to benefit from other advantages. Without going any further, the convenience of electronic invoicing.
The role of easyap in combating late payments
In this regard, at easyap we have seen how many companies have optimized their billing processes. And not only that, but they currently have no problems when filing their taxes.
Whether for convenience or because of legal requirements, having electronic invoicing solutions such as those we develop at easyap is practically a necessity for any business. If you have not yet taken this step towards digital transformation, we encourage you to do so. In fact, here we tell you about the changes for 2023 regarding business invoicing.
With our solution, you can enjoy the following advantages:
– Reduce tax risks with an optimized storage system and a highly useful tax information service.
– Enjoy greater security and agility when issuing and receiving electronic invoices.
– You improve the experience of your customers and suppliers who can conveniently check the status of their invoices. Cycles are shorter.
– You save money by eliminating printing and postage costs and increasing productivity.
– You automatically record issued invoices and record them electronically.
And, naturally, with a solution like easyap, you comply with all the requirements of the aforementioned Crea y Crece Law. If you want to know more about this regulation and how to comply with it using good software, just contact us. We will be delighted to meet you and help you.
