Suomen Yrittäjät: Regulator for long payment terms must be set up without delay

“Large companies use smaller companies as banks. They claim that long payment terms have been agreed, even though in reality they were dictated. The way it’s done in Finland is that big players unilaterally tell small business owners when they will get paid,” says Petri Salminen, Chair of Suomen Yrittäjät.

The Suomen Yrittäjät Representative Council discussed the issue in its session on Tuesday. The association says the payment terms legislation itself is sound, but compliance is badly lacking. Some large companies, in particular, are delaying payments for months.

“Small subcontractors have virtually no practical way to challenge the situation. Establishing a supervisory authority would create a channel where business owners suffering from late payments could report unlawful conduct,” Salminen says.

The association says implementation can no longer be deferred. The government’s spending talks set out a position on enforcement of payment terms regulation, and the same position was recorded at the budget session.

Unlawful payment terms at record levels

By law, payment terms on business-to-business invoices may only exceed 30 days if the parties expressly agree. The Yrittäjägallup survey shows that this has not been done in 65% of cases. This is the highest figure ever recorded.

The proportion of cases where terms exceeding 30 days are properly agreed has fallen over the past year, meaning the law is being broken more frequently. Compliance is strongest in manufacturing, primary production and trade, and weakest in professional services, other service sectors and construction.

The absence of enforcement is reflected in companies’ financial difficulties. Around one in five SMEs is under financial strain, and the European Commission estimates that as many as a quarter of all bankruptcies result from businesses not receiving payment on time.

“This is also a question of growth. When money does not move between businesses fast enough, it weakens SMEs’ opportunities to grow,” Salminen adds.

The association says the issue has been dragged out for far too long.

“During the previous government term, the Ministry of Justice prepared a proposal for establishing a supervisory authority, so the groundwork has been done. The matter is ready — it just needs to be acted on,” says CEO Mikael Pentikäinen.

“Suomen Yrittäjät is regularly contacted by business owners across Finland about this issue. We respond by contacting the companies imposing unreasonable payment terms. Many change their practices, which is a positive sign. This shows there is a clear need for regulatory oversight,” Pentikäinen says.

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