Portuguese firms lag behind European counterparts: merely one out of every five companies abide by prompt payment schedules.
In a troubling revelation, a study conducted by Informa D&B has highlighted a significant problem with late payments by Portuguese companies, with only 20% meeting agreed payment deadlines with suppliers. This figure is notably lower than the European average, indicating a growing divergence from the continent.
The study suggests a trend of late payments by Portuguese companies, which can be linked to economic and financial challenges faced by these businesses. Inflation and rising costs have been a major concern in Portugal, with the cost of a basic food basket rising continuously and peaking in early 2024. This inflationary pressure strains companies’ working capital as they face higher input costs.
Moreover, companies with tight cash flow may delay payments to suppliers to manage liquidity risks. Given the inflationary environment and rising costs, Portuguese companies might preserve cash longer, causing delays in payments.
The study also hints at possible delays in banking or payment processing systems as a contributing factor. Cross-border payments in foreign currency can take multiple days to process due to conversion delays, affecting timely payments to international suppliers. Domestic payment processes might also suffer from delays influenced by similar operational factors.
Despite the potential for economic development in sectors such as the data center market, rapid growth often requires heavy capital investments. These investments might constrain free cash flow in the short term, impacting payment punctuality.
The problem of late payments by Portuguese companies is not just significant for individual businesses but may have implications for the Portuguese economy as a whole. The study's findings may have ramifications for the European economy as well, given the interconnected nature of the continent's economies.
The study was released today, shedding light on an issue that has long been a concern for suppliers and businesses in Portugal. It serves as a call to action for the Portuguese government and businesses to address this issue and work towards improving payment practices to ensure a healthier and more stable economic environment.
- The social and financial challenges faced by Portuguese businesses, such as inflation and rising costs, may lead companies to delay payments to manage cash flow, potentially impacting their relationships with suppliers and contributing to a persistent problem of late payments.
- The delays in payment practices by Portuguese companies could have far-reaching implications, not only for the productivity and stability of the domestic economy but also for the interconnected European economy, as the study suggests that late payments are a growing concern across the continent.
