No excuse for late payments

Date: 21/11/1996

“THE cheque is in the post” is a common refrain when individuals are chided for being late in settling outstanding bills.

Although it is rarely literally true, it is a response which helps cover any embarrassment over delays due to an oversight or cash-flow problem. And it is usually followed by swift action.

Institutions and large companies, which use bank transfers to make payments, cannot use such stalling tactics. But equally, many do not consider it necessary to offer an explanation, however hollow.

For some, delays are due to bad administration. For others, it is official policy to postpone settling bills until the last possible moment.

The detrimental impact of excessive delays on those who are owed money usually far outweighs any benefits which the debtors might enjoy. The imbalance is even greater when the creditors are either individuals or small companies for whom regular settlement of accounts and a smooth cash flow can mean the difference between success and failure.

The spotlight is now falling on late payments for two other reasons. The first is the increasing tendency of large companies and international institutions, such as the European Commission, to contract out to individuals, businesses or non-governmental organisations many of the regular or one-off tasks they would previously have carried out in-house.

The second is the importance being attached, especially by the Commission, to the role of the EU's 18 million small and medium-sized enterprises in strengthening the Union's economic performance and generating much-needed jobs. Yet it is these companies which are often the first victims of the late payers.

The Commission itself rightly drew attention to the problem 18 months ago. But, as an investigation by European Voice this week reveals, the institution itself is by no means blameless.

Staff have been officially instructed that bills should be settled within 60 days. But many creditors complain of having to wait several months - and even up to two years - for payment.

The slow-moving wheels of bureaucracy are frequently to blame for the delay, but the Court of Auditors would certainly not hesitate to complain forcefully if precipitate payments were made without regard to proper accountancy procedures.

Whatever the explanation, the result is the same. Excessive delays cause hardship and even disaster for those on the receiving end, stoke up ill will and damage the reputation of an institution whose main raison d'être is to try to raise standards throughout the Union.

It is hardly surprising that unpaid bills are one of the most common sources of complaints lodged with the new EU Ombudsman.

Budget Commissioner Erkki Liikanen himself acknowledges the problem. Ensuring the 60-day rule is evenly applied is one of the elements of the sound and efficient management programme he is currently introducing throughout the institution.

Instilling a stronger budgetary culture and devolving more decision-making to individual departments should speed up payments and make it easier to pinpoint officials responsible for unreasonable delays.

But for the problem to be tackled effectively both within the EU institutions and outside in the wider world, Union governments ought to consider introducing legally enforceable financial penalties for long-overdue payments.