Liquidity crisis and violation of payment terms in Serbia

The Law on Payment Terms and Payment Transactions is still not implemented. Almost nobody adheres to it or, rather, the stipulation that financial obligations have to be settled within two months the most.

Despite the fact that payment terms for goods and services in Serbia cannot exceed two months, the average waiting time for an invoice to be paid is 138 days. According to the new regulation, the 60-day-payment terms will be applicable to contracts concluded between companies as of 1st January, 2016. In terms of the public sector, the payment terms are even shorter and they stand at 45 days. However, none of this is implemented in practice.

Because their invoices are not paid on time,, companies have found themselves in a very difficult situation. The latency in settling invoices is causing a great damage and raising the level of illiquidity. In order to pay VAT, salaries and other financial obligations towards the state, companies often take out loans with the annual interest rates ranging from 12% to 14%. Most of them are also struggling to pay these loans.

“The illiquidity in our economy is chronically high and this is often affected by a low purchasing power – the Business Support Network says. “In the last few years, the retail sales have been declining and, in order to keep their customers, shop keepers are now allowing deferred payment up to year, or in 12 installments. However, this waiting period affects the suppliers which are not paid for the delivered goods on time.”

Local self-governments are the worst when it comes to paying invoices on time, particularly when it comes to the work done in the healthcare and education sectors. The payment terms here usually extend to five or even six months. The state should react in such cases and stop transferring funds to those local authorities that don’t honour payment terms. This has worked in the past.

The average waiting period in big food production companies is 90 days and sometimes more than 100 days. In meat processing industry, the average waiting period is between 60 and 85 days.

DIFFERENT PAYMENT TERMS IN THE EU TOO

Serbia has to shorten its payment terms as it nears the EU accession. The EU directive stipulates a 30-day-payment-period but some EU countries do not adhere to this. The most developed countries stick to the 30-day-payment period, while in medium-developed countries it is 45 days and 60 days in Poland and Croatia.

(Vecernje Novosti, 05.10.2016)

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This post is also available in: Italiano

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