Irish firms lose 51 days a year chasing late payments – at a cost of €2.8bn
Irish businesses are spending over 51 days per year – a fifth of the working year – chasing late payments, according to the annual European Payment Report (EPR) from credit management services provider Intrum.
The 26th edition of Intrum's report surveyed more than 10,000 companies across 29 European countries, shedding light on the challenges that businesses are grappling with in challenging economic conditions.
Its findings show that, while Irish businesses spend the lowest amount of time chasing payments out of all 29 European countries, the wasted hours are costing the Irish economy more than €2.8bn** a year. The average across Europe is 74 days.
Most Irish respondents (90 per cent) said they have been asked to accept longer payment terms than they feel comfortable with over the past 12 months. Almost six in 10 businesses (58 per cent) expect late payments to increase in the next year.
"Late payments pose a significant challenge to businesses," says Eddie Nott, Intrum's Managing Director for the UK and Ireland. "The practice becomes a vicious cycle, as firms hampered by late payments pay their own suppliers later and later, further exacerbating the problem."
Close to half of Irish firms (44 per cent) say the payment terms they offer suppliers are harming them as a business. A similar number (45 per cent) said they are paying their suppliers later than they would accept from their own customers – up from 38 per cent in 2022. While 60 per cent would like to pay their suppliers quicker, this is not currently feasible for their business.
At the same time, Irish firms are facing increasing demands from cash-strapped workers seeking above-average pay increases. Three quarters of the businesses surveyed (76 per cent) said their employees have already asked for a higher-than-normal pay rise or they expect them to ask for one soon.
Over a third (37 per cent) of Ireland's businesses said late payment is a threat to their survival. If they were paid faster, companies say they could pay their own suppliers faster, plus expand their products and services.
The most common action Irish businesses take to chase down debt is legal action (54 per cent) while a third (33 per cent) have clear internal debt recovery processes. Only 18 per cent are working with external collection agencies.
"Late payments have always plagued businesses but what was once an inconvenience has now become a top priority," adds Nott. "Resources that could be used to invest in growth, digital transformation and hiring are being diverted to ensure firms get paid. This is costing the Irish economy €2.8bn a year in wasted time."
*255 working days of the year. 51 as a percentage of 255 is 20 per cent
** Figure based on Intrum survey findings extrapolated using OECD (Organisation for Economic Cooperation and Development) data on working hours and average salaries across European economies
About The European Payment Report 2023
The European Payment Report 2023 is an instrument for gaining insight into the challenges and opportunities businesses across Europe and a number of sectors are facing. The report is based on an external survey conducted by FT Longitude in 29 countries in Europe.
A total of 10,892 CFO or other subject matter experts with financial knowledge of the company they work for participated in the 2023 edition of the survey. The fieldwork for the study was conducted between November 2022 and March 2023. A total of 10,892 small, medium, and large companies across 15 industry sectors participated in the research.
The EPR report for Ireland will be published on the Reports & Insights page here on 23 May 2023.