Should the rules governing payment periods really be tightened?

The debate about the need for stricter regulation of payment periods has been reignited by sluggish economic growth and has led to a draft European regulation that was presented on 12 September. However, the effectiveness of the planned adjustments is being questioned.

At the end of October, the French Department for Competition, Consumer Protection and Fraud Prevention (Direction générale de la concurrence, de la consommation et de la répression des fraudes) denounced around forty French companies that had been caught red-handed for not complying with the legal provisions on payment deadlines. The fines imposed, which range from small amounts for smaller companies to more than one million euros for companies such as SFR Fibre, Veolia Water, Métropole Télévision, Showroomprive.com and Brico Dépôt, demonstrate the government’s determination to “systematically punish irresponsible and destructive behaviour”.

An imperative for companies: Change and opt for sustainable working capital requirement (WCR) management

“Managing cash flow by delaying payments to suppliers is not a viable option, especially as we now need to start thinking about the integration of non-financial reporting issues and the concept of double materiality, as ‘name and shame’ damages a company’s reputation and therefore its CSR (Corporate Social Responsibility) policy,” emphasises Caroline-Emilie Schuster, Partner at Eight Advisory.

Upcoming Regulatory Changes

Although the French Finance Act (Projet de loi de finances PLF) provides for a switch to electronic invoices to solve the current problems associated with the manual processing of paper documents, the recently postponed implementation to the end of 2026 raises concerns about its immediate effectiveness.

On the European side, the proposals made by EU Commissioner Thierry Breton on 12 September – the tightening of sanctions through a European regulation and the shortening of the payment period from 60 to 30 days – raise questions.

“With its law on the modernisation of the economy (loi de modernisation de l’économie LME), France has created a framework for inter-company relations and set a maximum payment period. However, the fines provided for in this law are rarely applied and an increase would have little impact,” notes Stéphane Nénez, Partner at Eight Advisory. Regulating payment deadlines at European level would be complicated, but would carry more weight.

Read the article by Charles Ansabère in Option Droit Affaires