Finnish Commerce Federation: The withdrawal of the Late Payment Directive is a welcome decision – companies must defend their freedom of contract 

In September 2023, the European Commission proposed replacing the current Late Payment Directive with a regulation according to which the payment period could have been up to 30 days, both in trade between companies and in contracts between companies and the public sector. The aim was to prevent late payments and the problems they cause, particularly to SMEs.

In connection with its work programme published yesterday, the Commission announced that it would withdraw its proposal. According to the Commission, the proposal has been reviewed by EU legislators for more than three years, and a considerable number of Member States are opposed to its continued review. Therefore, the proposal is not estimated to receive sufficient support at the Council within a reasonable time.

The Finnish Commerce Federation has objected to the unconditional maximum payment period of 30 days and demanded the withdrawal of the proposed regulation for a long time. According to the Finnish Commerce Federation, the proposal would not only have addressed late payments as it would also have significantly restricted companies’ ability to agree on terms of payment and reduced the flexibility of retail and wholesale trade.

The Finnish Commerce Federation emphasises that invoices must be paid on time, but companies must be able to agree on terms of payment that are suited for their business between themselves.

”The withdrawal of the Late Payment Directive is a welcome decision and a significant win for our lobbying. Preventing late payments is a justified goal, but a strict payment deadline for all companies would have been the wrong way to achieve it. Companies must be able to agree on terms of payment that take into account their business and the different sales times of their products,” says Kari Luoto, Managing Director of the Finnish Commerce Federation.

Flexible payment periods are important for many companies in the commerce sector 

Companies in the commerce sector purchase products to warehouses before selling them to customers. Mutually agreed terms of payment help to balance the invoices paid to suppliers and revenue from sales in both the wholesale trade and business-to-consumer trade. This is especially important in the sales of seasonal products and slow-moving products, where a considerable amount of time may pass between purchasing and selling the goods.

The decision is important for the hardware trade, for example, where the product ranges are extensive and some of the products may circulate slowly in the warehouse. Seasonal fluctuations in construction and renovations also affect demand. In the industry, the availability of spring season products is usually ensured with pre-orders already in the previous year, which is why flexible payment periods are of key importance in the cooperation between commerce and manufacturers.

”A strict payment period could lead to a situation where the store has to pay the supplier a lot for the products before the products have been sold to the customer. This would increase the company’s need for working capital and external funding, and thus increase the costs of companies,” says Riikka Vaaja, Managing Director at RASI.

For further information, please contact:

Kari Luoto, Managing Director, Finnish Commerce Federation, tel. +358 400 688 708, kari.luoto(at)kauppa.fi

Riikka Vaaja, Managing Director, RASI ry, tel. +358 44 305 6027, riikka.vaaja(at)rasi.net