Delayed payment in the SME sector

 The Polish government has approved a new law to eliminate or at least reduce the number of cases of delayed payment in the SME sector (Small and Medium Enterprises). For a long time there have been cases of regular non-payment of bills by large organizations for companies from the SME sector on the Polish market. Often, the contractors of large enterprises are small and medium-sized companies, which, if they do not receive payment for a long time from the client organization, liquidate their activities due to lack of funds for doing business.

 From January 1, 2020, a new law comes into force that sets the maximum payment deadline for 30 days if the customer is a government agency (there is an exception for medical organizations where the payment deadline is extended to 60 days).

Previously, large corporations could impose their terms of cooperation, including setting a favorable time for them to pay the bill, as they are large clients. Now the maturity is regulated by law and is 60 days if the transaction occurs between a small enterprise (contractor) and a large corporation (client). If the service/delivery of goods will be carried out in parts / lots, payment can also be made in parts.

The new law also stipulates that from now on, the contractor may withdraw from the cooperation agreement if the client does not pay within 120 days. Previously, the contractor could not refuse the contract, even if the client did not pay for a long period of time.

Under the new law, large companies must publish their reports on “payment practices” every year. Before starting cooperation with a large company, companies from the SME sector can check the payment practices of this company and find out whether the company has paid off all its obligations and in what time organization usually pays for invoices from counterparties. This decision will allow small companies to protect themselves from large organizations that delay payment or do not pay at all.

The new law also provides for an increase in the percentage of commission for non-payment by the customer from 9.5% to 11.5% per annum. The percentage was increased to be compensation for the contractor for the fact that the client did not pay the bill by the deadline.

In addition to interest, the contractor may also request compensation. Starting January 1, 2020, three compensation thresholds will be introduced:

• 40 euros per invoice, which does not exceed 5,000 zlotys,
• 70 euros per invoice from 5,000 to 50,000 zlotys,
• 100 euros for an invoice equal to or exceeding 50,000 zlotys.

Summing up, we can say that now companies from the SME sector have become more protected from irresponsible large companies that do not pay for the services or goods rendered. However, do not forget that the very existence of the law does not guarantee its implementation by all market participants. To avoid unpleasant business practices, we recommend that you carefully check your counterparties. An additional guarantee will be the conclusion of contracts that will govern various unforeseen scenarios.