Thursday, 5 May 2011
Question 9: To ask the Minister for Enterprise; Trade and Innovation the measures he will introduce to prevent delayed payments to small business; the monitoring and enforcement that is in place to administer the 15 day prompt payment rule; the mechanisms that will be put in place when prompt payment has not been met; and if he will make a statement on the matter. [10007/11]
Payment terms in commercial transactions are determined by the parties concerned and the responsibility for the collection of those payments and general credit control rests with the selling enterprise, in the first instance. The issue of late payment is covered by the European Communities (Late Payment in Commercial Transactions) Regulations 2002, SI 388 of 2002.
Under these regulations, it is an implied term of every commercial transaction that where a purchaser does not pay for goods or services by the relevant payment date, the supplier shall be entitled to interest, "late payment interest", on the amount outstanding.
In the absence of any agreed payment date between the parties specified in the contract, late payment interest falls due after 30 days has elapsed, provided the invoice is not subject to query. Since 2009, Departments have been improving their respective payment times, so as to assist the cash flow of businesses, which is critical, and are now obliged to pay their suppliers within 15 days of receipt of a valid invoice. This has been extended across all Departments. The 15 day prompt payment rule was introduced to Departments on an administrative basis.
Departments are required to report quarterly on their performance in meeting this target. To date, six sets of quarterly returns have been published on the website www.deti.ie. The ongoing publication of these returns by my Department provides clarity on the performance of individual Departments.
As part of the commitments in the EU-IMF programme the 15 day prompt payment rule is being extended beyond Departments and is being rolled out to the Health Service Executive, local authorities, State agencies and all other public sector bodies, excluding commercial semi-State bodies.
Businesses experiencing any difficulties in securing payments should in the first instance approach the body concerned. Any failure to comply with the initiative can be brought to the attention of the relevant Minister with responsibility for the body concerned. This initiative, which is critical, should have a considerable impact on the cash flows of small companies.
I worked with approximately 2,000 separate businesses in the past seven years in my previous job as a management consultant. One of the major problems they had was getting paid on time. On many occasions when they went to banks, banks did not wish to get on the wrong side of the chain of credit.
I thank the Minister of State for his reply. Because the system is voluntary the Minister of State indicated that a letter will be sent to the relevant Minister in an effort to come to a resolution. Are there any incentives or penalties which can be levied on an offending organisation which has not adhered to the 15 day rule?
A total of 60,666 payments totalling €1.7 billion have been paid. Some 50,000 payments were paid within 15 days which indicates a high level of compliance on behalf of semi-State bodies in a system which is currently operated on an administrative basis. I fully agree that cash flow is the backbone of any business. Given the lack of credit to small companies it is critically important that payments are made within 15 days or at the very least within 30 days. There is no sanction after the 15th day, but there is a sanction if payment is not made by the 30th day.
Clearly, Departments are moving in the right direction and we hope that in the private sector and commercial world people will pay within 30 days. In many cases, the bigger the company, the slower it can be in paying. We encourage companies to pay on time because prompt payment is the life blood of a business. We recommend that with the support of the banking sector, payment is made within 15 days. It is encouraging that some €1.722 billion was paid within 15 days.
Fourteen Departments have paid between 96% and 100% of their invoices within 30 days and this Department has paid 91% of invoices within 30 days. I would be delighted if compliance with the 30-day rule was implemented in the private sector because that would be a great benefit for the viability of small companies. That is not the case currently. The Departments are setting a good example and I am pleased with how they are operating the rules currently. It is clear they are taking the advice of the State and paying the invoices of small companies that are the backbone of our economy, the bulk of them within 30 days and quite a number within 15 days. That is very encouraging. Therefore, administrative sanctions would not be recommended currently, because there is significant compliance.