Debtors represent around 40% of the balance sheet of Maltese companies, and yet payment duration remains much higher than the European average.
The Malta Association of Credit Management said that in the construction sector, it is estimated that the cost of late payment accounts for 24% to 60% of the net profit of companies.
“Maltese businesses generate €4.2 billion value added, thus benefits from improved payment practices could be very high,” a European Commission survey reported.
The MACM was chosen as a case study for the survey conducted across the 28 EU member states earlier this year, assessing the effectiveness of its activities to determine best practice when it comes to combating the scourge of late payments.
Unfair payment practices remain widespread in trade transactions across the EU and late payments have significant consequences for businesses, jobs and economic growth.
The MACM promotes good credit management practices and a organises a comprehensive series of courses and seminars.
In spite of this, payment practices in Malta have worsened since 2010. According to the MACM, the average payment time for both government and commercial transactions increased from 78.5 days in 2010 to 90.93 days in 2013 and more than 91 days in 2015.
There was a slight decrease (two days) between 2015 and 2016, but the average payment time remains significantly high compared to the European average (34 days in 2016).
The latest MACM survey reported improvements in the construction and pharmaceutical sectors, where payment duration dropped by about six days between 2015 and 2016.
According to the MACM director general Josef Busuttil, this improvement can be explained by the improvement of payment practices in the public sector and the recovery of the Maltese construction sector.
According to one MACM member, the debt collection techniques learnt thanks to the MACM seminars have allowed saving of €40,000 to €60,000 per year through the avoidance of their debtors defaulting.
Follow the link below for the full Report published by the European Commission: