Terence Flanagan (Dublin North East, Independent)
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73. To ask the Minister for Jobs, Enterprise and Innovation the position regarding small and medium enterprise credit (details supplied); and if he will make a statement on the matter. [4393/14]

Richard Bruton (Dublin North Central, Fine Gael)
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Prompt Payments for goods and services rendered is critical to the effective working of any economy and is an issue on which this Government places great emphasis. In an effort to help ease cash flow difficulties for Irish small businesses operating under the current economic environment, while at the same time, setting an example for businesses in the private sector to improve their payment record by paying each other more promptly, Ireland has introduced, on a voluntary basis:

A 15 days prompt payment requirement for all central Government Departments to pay their business suppliers within 15 days of receipt of a valid invoice. This arrangement applies to all valid invoices received on or after 15 June 2009;

A similar arrangement has now being extended beyond central Government Departments to our State Agency Sector to include the Health Service Executive, the Local Authorities, State Agencies, and all other Public Sector Bodies, (with the exception of the Commercial Semi-State bodies). These new arrangements apply in respect of valid invoices received on or after 01 July 2011.

This legislation will act as a deterrent to late payment and as a driver for payment on time by establishing a clear expectation in law that payment will be made according to agreed terms. It lays down the specific deadlines for the payment of invoices and establishes a right to compensation in the event of late payment in all commercial transactions, whether they relate to transactions between private or public undertakings, or between undertakings and public authorities.

The Regulations specifically provide that Public Authorities must pay for goods and services that they procure within 30 days. Payment can be extended up to 60 days only it if is “expressly agreed” and justified in light of the nature or feature of the contract.

For business to business transactions, where no contract exists, the payment period is set at 30 days. Where a contract stipulating the payment period does exist, normally such a period should not exceed 60 calendar days unless both parties agree otherwise and providing it is not “grossly unfair” to the creditor. For small businesses in particular, this contractual freedom to agree payments terms is vital as it provides protection when negotiating payments terms with larger companies.

Any harmonisation of payment periods for business to business transactions could lead to a loss of flexibility and contractual freedom by removing the ability of companies, especially SMEs, to compete with payment periods offered to customers. This in turn could put more pressure on other aspects of contract negotiation where larger companies can still exercise significant influence over small companies.