20.2.2020 14:45

Mall of Tripla raises a burning problem: “not caring about payment terms seems to be the done thing in this country”

There may be no other solution to excessively long payment terms than a whistle-blower channel. This is the opinion of Tiina Toivonen, Legal Affairs Manager at Suomen Yrittäjät.

There may be no other solution to excessively long payment terms than a whistle-blower channel. This is the opinion of Tiina Toivonen, Legal Affairs Manager at Suomen Yrittäjät. 

The Mall of Tripla, a giant construction project in Finnish terms, has raised the issue of companies’ long payment terms. The Mall of Tripla is in Pasila, Helsinki.

Finnish public-service broadcaster Yle reported that building company YIT had informed its subcontractors that their invoices would only be paid after further investigation. Some of the invoices fell due months ago. As far as Suomen Yrittäjät is aware, some companies are owed hundreds of thousands of euros, which they have struggled to receive from YIT for months.

We have reported on the problems caused by long payment terms for small businesses before. In the Yrittäjägallup opinion poll published in the autumn, 60% of respondents said payment terms had been extended without the consent of the invoicing party. In addition to the construction sector, there have been problems in the industry and retail sectors. Payment terms also came up in the Yrittäjägallup in 2018.

At worst, unreasonably extended payment terms may prove fatal for businesses.

Mikael Pentikäinen, Suomen Yrittäjät CEO and President, says, “Big companies, and sometimes small ones too, do not pay their invoices on time. This is a burning problem which can cause very difficult situations. Not caring about payment terms seems to be the done thing in this country.”

Unusually, according to Yle, the case centres on a decision across the board not to pay certain subcontractors’ invoices pending further investigation.

By law, the maximum payment term is 30 days, unless otherwise agreed. It is possible to agree on longer terms, but according to Pentikäinen, long payment terms are too often applied without agreement between the parties.

“It’s sometimes natural for payment terms to be long, but they must always be agreed upon and agreements must be honoured. Payment terms can stretch to as long as 60 days regardless of what a contract might say,” Pentikäinen says.

A whistle-blowing channel as a solution?

Suomen Yrittäjät Legal Affairs Manager Tiina Toivonen says companies are rarely willing to challenge clients for their receivables.

“The message we hear from businesses is that they don’t want to publicly challenge clients they have contracts with to receive payments due. That could mean losing contracts and reputational damage.”

As a solution, Suomen Yrittäjät suggests a whistle-blower channel which would allow for anonymous tip-offs by companies suffering from excessively long payment terms.

“In Finland we have supervisory authorities, such as in consumer law and competition, that people could make anonymous submissions to.”

An authority that supervised payment terms could be the recipient for tip-offs about companies that act wrongly. This would answer businesses’ calls for the opportunity to report on these issues anonymously. This is just what businesses owners would like to see at the moment.

Mikael Pentikäinen says careful thought should go into the choice of authority as a channel for tip-offs.

“If several notifications came in about the same company, the authority could investigate and try to get to the bottom of things.”

“We’re not supposed to be banks”

The unanimous decision by YIT to freeze payments to contractors does not affect all the companies involved in the Tripla project. Tommi Hannuksela, CEO of Top Building Oy, has no criticism of YIT’s operations.

“Every bill has been paid on time. Everything’s gone well,” he says.

Hannuksela’s company was responsible for the carcasses of the Mall of Tripla, the underground car park, the Pasila railway station and the new multi-storey blocks of flats.

“This is absolutely the largest-scale project we’ll ever have.”

Hannuksela says that his company’s clients have paid their invoices without fail in other projects in recent years, too.

“Payment terms have got longer, but compared to the rest of Europe, they’re still reasonable in Finland.”

Top Building’s clients’ payment terms have been 30 days on average and 21 days at their shortest.

“I think that’s appropriate. I wouldn’t want them to be longer, as we’re not supposed to be banks. And banks don’t provide credit for free.”

Top Building has approximately 75 employees and a turnover of approximately €15 million.

Photo: YIT

Pauli Reinikainen

pauli.reinikainen (at) yrittajat.fi