We've been asked by a number of our clients lately to sign terms of business that are requesting payment terms of 60 days end of month. We just want to highlight the fact that its actually against; The EU Late Payments Directive (2011/7/EU) and therefore worth mentioning to your clients if they do ask. We also appreciate that unfortunately in many ways the clients are in the driving seat, however they are also requesting the use of your service so that can be viewed both ways.Must debts be paid within a maximum period?
The rules impose statutory maximum periods, within which debts must be paid. The periods are:
Can you contract out of the statutory maximum? Can your client request to extend the maximum payment terms?
- 60 days for B2B (Business to Business) Contracts
- 30 days for B2P (Business to Person) Contracts
The parties to a B2B Contract can only extend the period for payment beyond the statutory maximum if that extension is both "expressly agreed" and not "grossly unfair" to the supplier. Yes you can extend the payment terms if both parties 'expressly agree' and it's not grossly unfair to you, the agency. The rules provide that in deciding whether an extension is "grossly unfair" three questions need to be asked: Is the extension a gross deviation from good commercial practice and contrary to good faith and fair dealing? Is the extension associated with the particular nature of the goods or services in question? Does the buyer have any objective reason to deviate from the statutory maximum? The onus is on the buyer to show that the extension is not "grossly unfair".
If you have any further questions on credit control/debt processes with Quba, please call a member of the team on 01305 233178