Late invoice payments pose a significant challenge for Portuguese businesses, negatively impacting their financial liquidity and operational stability. This issue has its roots in various historical and contemporary factors.

Sources of the Problem

One of the main factors contributing to payment delays was the COVID-19 pandemic, which caused significant disruptions to business operations. Many entrepreneurs struggled with operational restrictions, declining demand, and supply chain problems, all of which affected their ability to meet financial obligations on time.

Another aspect is Portugal’s traditionally peaceful approach to interpersonal relationships. The business culture often emphasizes maintaining good relations with contractors, which can lead to tolerating late payments and avoiding financial confrontations. While this approach helps preserve business relationships, it can also result in serious financial issues.

Payment delays create a domino effect, where one company failing to receive its dues on time cannot fulfill its obligations to suppliers and business partners. The Portuguese economy is currently caught in a cycle of such obligations, leading to an increase in corporate insolvencies.

Numerical Data

According to data from the consumer organization DECO, the pandemic led to a record level of debt in Portugal. The number of companies filing for insolvency or liquidation increased, reflecting the deteriorating financial situation of many citizens and businesses.According to the European Union directive, companies should pay invoices within 60 days unless otherwise agreed, and public entities within 30 days. Unfortunately, in practice, these deadlines are significantly exceeded, posing challenges for many businesses. In 2023, the average invoice payment term in Portugal was 118 days. This means that most invoices were paid long past their due date, and a significant portion remained unpaid. This trend persists, and due to the high costs of legal debt recovery actions, most low-value debts (up to 1.000€) are never recovered, even though debtors continue to operate successfully in the market.

Summary

Late invoice payments present a serious challenge for Portuguese businesses. A combination of long-term pandemic effects, the specifics of Portuguese business culture exploited by unscrupulous entrepreneurs, and payment bottlenecks contribute to the worsening problem. Implementing effective receivables management strategies and promoting a culture of timely payments is crucial to ensuring financial stability for companies in Portugal.

Solutions

To counter the issue of overdue payments, businesses can benefit from specialized debt collection services. GLRD offers innovative and comprehensive solutions for debt recovery, helping companies effectively manage their receivables. Our services include both preventive and intervention measures aimed at minimizing risks associated with payment delays and ensuring financial stability for our clients.

Partnering with GLRD allows businesses to focus on their core activities while we handle professional and efficient debt recovery, maintaining good business relationships with their contractors.