Standard remains 30 days
Under the new law, the 30-day standard customary in the Netherlands will continue to prevail. In fact, the government is and remains obliged to pay within 30 days. Companies are allowed to deviate from the norm among themselves, albeit to a maximum of 60 days. Contracts concluded after 1 July 2017 must comply with the payment period of 60 days (at the latest). Existing contracts can still be adjusted until 1 July 2018. This is easier said than done.
Hidden risks and issues
First, as a corporate, you need to identify which of your suppliers belong to SMEs. This can be done by requesting financial data or by sending a self-assessment letter. In addition, every company has a lead time when it comes to processing and paying invoices. Entering, approving and paying an invoice: this can take a long time, sometimes more than 60 days.
Furthermore, the maximum payment period also raises questions regarding capital. What does it mean for the cash position? Is liquidity sufficient to cover the shortened payment period? What are possible interest costs of any receivables and has this been factored in?
Consequences of violation of Payment Terms Act
A contract that includes a payment period of more than 60 days is void. The payment term then automatically falls to 30 days. The supplier is also entitled to compensation at the current statutory commercial interest rate of 8% per cent. This interest can be claimed even up to five years after the date.
