Last week, the Council of Ministers approved the reform of the Capital Companies Act, which stipulates that companies that do not comply with the maximum legal payment period of 60 days must explain the reasons for this and what measures they will take to reduce this period. In addition, the law requires the average payment period to suppliers to be published in the annual accounts. This requirement applies both to listed companies, which must publish this information on their website, and to unlisted companies that do not submit abbreviated annual accounts, which must also report the average payment period to suppliers on their website, if they have one.
The part of the process that affects the Accounts Payable department is critical. The processing of invoices received can be a major bottleneck when the department's resources are not well managed or the process has not been well designed within the company's overall organizational structure.
New regulation: Delinquency in Accounts Payable
It should not be forgotten that in March, the European directive against late payments to SMEs came into force, setting maximum payment terms for suppliers at 30 days for the public sector and 60 days for the private sector.
The regulations included several measures for compliance with these deadlines:
- The creditor is entitled to late payment interest at ECB + 8% plus €40 in collection costs.
- Any clause in the payment terms that excludes the payment of interest for late payment or a clause that establishes longer payment periods than those established (30 days is the general rule and up to a maximum of 60 calendar days for companies operating in the public health sector and certain public companies) will be automatically void and will give rise to compensation for damages (to be determined by each Member State).
Although a few days ago the Minister of Finance, Cristóbal Montoro, announced that the government is preparing legislative changes that will include penalties for large companies that fail to meet the deadlines set out in the law on combating late payment when settling their debts with SMEs and the self-employed, it is not entirely clear, within the regulations approved on May 23 whether a specific penalty system for non-compliance with these measures will be included. Associations and organizations that support SMEs and the self-employed, as well as platforms against late payment to suppliers, have criticized this loophole and will surely pressure the executive to implement specific short-term actions that more strictly compel companies to comply with these deadlines.
Change in the supplier payment process
According to the latest report from the Multisectoral Platform Against Late Payment, the average payment period in the public sector has fallen from 141 to 111 days, while in the private sector it has fallen from 93 to 85 days. These figures still represent a difficult situation for companies that are accustomed to significant delays in payment.
In light of this data, it is clear that the vast majority of companies must reconfigure their supplier payment processes in good time so as not to suffer the consequences of a law being enforced with very little time to adapt, which has been the general trend in all legal changes in recent months.
And even in the case of companies that meet these deadlines, as we mentioned in a previous article, it is advisable to reduce the times directly subject to the Accounts Payable process in order to reduce costs and improve internal control.
