An Innocent (Company) Supplier Abroad Can Expect to Get Paid Later

Even though I’ve noticed first hand in the worlds of management consulting and publishing how companies are increasingly paying outside of specified payment terms in recent years, it would seem there is anything but a universal standard, even within cooperative economic regions and trading partners, when it comes to how late many buying organizations pay. Indeed, the percentage of payments made at 30 days or more past terms is surprising in many countries.

Looking at data from D&B that’s a bit out of date (Q4-2008) – though still very much directionally indicative – it appears that buying organizations in many developing countries seem to top the list of late payers. Consider the percentage of payments made 30 days past term in the following developing markets: Malaysia (41.5%), India (52.1%), Guatemala (48.6%), Jamaica (46%) and Uruguay (47.1%). Yet European countries and those in/around the EU are not always that much better.

Even though, for example, in the UK, only 18% of payments are made outside of the term + 30 day window, the numbers climb much higher in other countries. In Turkey, 76.6% of payments are made outside the window. And in Portugal, Luxembourg and Austria, the numbers are 36.2%, 35.1% and 29% respectively. And as we all know, even within the EU, actual terms can vary significantly as well.

I’ve heard from friends on the continent  that it’s often faster to get a bespoke suit made in Italy with multiple fittings than it is to get paid by a typical Italian company, even when payments are made per agreed upon terms. Personally, I think the better measurement in France and Italy is whether or not agreed upon payment terms outlast the typical lifespan of the typical senior politician's mistress, but I won’t go there.

On a more serious and agamic note, cultural, geographical and regional variations in payment patterns are potentially telling of much more than the efficiency of company A/P and treasury functions. Regions where buyers default on a regular basis on payment terms are potentially opening themselves to greater distrust in buyer/supplier relationships. And quite often, I'd argue, they’re also driving up total cost by forcing suppliers to charge more for their goods as services to maintain higher levels of working capital.

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