Late bill payments add to the squeeze
The late payment Hall of Shame is getting rather crowded. Governments and businesses across Europe are increasingly using underhand methods to delay or avoid paying their bills, Reuters reported at the end of June 2011.
European companies wrote off a staggering EUR 312 billion (USD 448 billion) for unpaid bills last year, according to Swedish-based credit management services group Intrum Justitia. That is more than the Greek, Irish and Portuguese EU/IMF bailouts combined, and an increase of 4 percent from EUR 300 billion in 2010.
Late or non-payment for services has long been a problem for Europe’s smaller companies – especially in businesses such as the cut-throat world of supermarkets, which are renowned for driving hard bargains and squeezing suppliers, says Reuters.
Experts worry that the mountain of unpaid bills, coupled with the euro zone crisis, surging food and energy prices and stringent terms for bank credit, will drive up insolvencies and job losses, hamper cross-border trade and snuff out any recovery.
Intrum Justitia says 28 percent of 6,000 companies across 25 countries quizzed for its respected 2011 European Payment Index (EPI) believe late payments pose a threat to their survival. Almost half said they prohibited growth.
Countries such as Greece and Portugal, as well as Spain and Italy, have seen late payments rocket. Greek public authorities, dealing with huge budget cuts, take around 108 days to pay a bill compared to 65 last year.
But among the big European economies, Britain stands out as one of the worst offenders according to Reuters. While some payment times have edged down slightly in the past three years, the amounts involved seem to be bigger. British companies now lose 3.2 percent of all the money they are owed, up from 1.9 percent in 2008.
"Around 25 percent of all bankruptcies in Europe are due to late payments," Intrum Justitia spokeswoman Annika Billberg was quoted as saying.
The UK-based Forum of Private Business (FPB), which advises small and medium-sized enterprises (SMEs), in 2010 put the brewer Molson Coors in its "Hall of Shame" for stretching payment terms to over 90 days.
Molson Coors shares its Hall of Shame listing with the likes of Dell Inc, the information technology giant, Danish brewer Carlsberg, double-offender Argos, the retailer, and beverages group Diageo. In 2009, AB-InBev also enjoyed a seat in this illustrious hall.
Underlining the uphill battle faced by suppliers, large companies say they too are feeling the squeeze. Molson Coors reportedly told Reuters that total profits earned in the brewing industry have shrunk by around 30 percent over the last five years.
According to financial reports supplied to the UK’s Companies House, Britain’s four big brewers in 2009 had a combined turnover of GBP 5.3 billion on which they recorded a total profit (EBIT) of GBP 115 million. In fact, two brewers recorded losses while two made a bit of a profit.
Now as all financial pundits know: big global firms like to accumulate overseas losses in the UK where they can write off the highest amounts against their tax payments.
Perhaps the big four brewers in the UK have also adopted this accounting technique and their profit situation is not as dicey as it may seem.
While there is no denying that brewers feel the economic squeeze, this should not be used to justify late payments.
