Transportation delinquency: Payment terms drop to historic low of 60 days

The landscape of payment terms in the transport sector is undergoing a significant transformation. As we enter 2025, the average payment period for transport companies has reached a historic low of just 60 days. This shift not only reflects a growing awareness of the importance of timely payments but also has far-reaching implications for the businesses involved. Let’s delve deeper into this trend and its implications for the transport industry.

The Historical Shift in Payment Terms

The reduction in payment terms to 60 days marks a notable milestone in the transport sector. According to the Permanent Observatory of Morosity, a collaborative effort between Fenadismer and the Quijote Foundation for Transport, this average was achieved in May and June, highlighting a positive trend that could redefine business practices in the industry.

This change is particularly significant considering the historical context; longer payment terms have often plagued transport companies, impacting their cash flow and operational stability. The transition to 60 days is not merely a number; it symbolizes a shift towards more sustainable business relationships.

The Current State of Compliance

Despite the encouraging average, a significant portion of companies, approximately 47%, continue to violate the morosity legislation by exceeding the 60-day payment threshold. This non-compliance indicates that there are still systemic issues that need to be addressed.

• Leveled Violations: Of the companies violating payment terms, 77% are only marginally over the limit, with payments between 60 and 90 days.
• Severe Cases: Alarmingly, about 7% of businesses still adhere to the outdated practice of extending payment periods to 120 days.

The persistence of these practices suggests a need for ongoing education and regulatory enforcement to ensure that all stakeholders in the transport sector adhere to fair payment practices.

Impact of Legislative Changes

Since the introduction of the sanctioning regime against morosity in late 2021, the average payment period has improved by an impressive 23 days, translating to a 30% reduction over the past few years. This change underscores the effectiveness of regulatory measures in promoting timely payments.

However, the legislative landscape is still evolving. The European Union is in the process of finalizing new regulations aimed at further combating morosity. The proposed regulation, which was approved by the European Parliament in April last year, aims to establish a maximum payment period of 30 days across all economic sectors.

Most Common Payment Methods in the Transport Sector

The methods of payment used in the transport sector reflect both convenience and the need for reliability. The predominant practices include:

• Bank Transfers: Representing 66% of payments, bank transfers are favored for their simplicity and speed.
• Confirming: Accounting for 29% of transactions, this method allows companies to pay suppliers within the agreed timeframe while extending their own payment periods.
• Promissory Notes: Used for 5% of payments, these instruments serve as a formal promise to pay in the future.
• Checks: Less than 1% of transactions are conducted via checks, indicating a shift away from this traditional method.

Challenges Ahead: The Need for Continued Reform

While the reduction in payment terms is a positive development, challenges remain. The ongoing resistance from certain member states regarding the new European regulation indicates a complex political landscape that could delay further improvements.

In addition, the high percentage of companies still operating outside the legal framework highlights a culture of non-compliance that needs to be addressed. Important steps moving forward include:

1. Enhanced regulatory oversight to ensure compliance across all sectors.
2. Educational initiatives aimed at informing companies about the importance of timely payments.
3. Encouraging industry best practices to foster a culture of accountability and respect for contractual obligations.

The Future of Payment Terms in Transport

The move towards shorter payment terms is indicative of a broader trend towards sustainability and fairness within the transport industry. As businesses adapt to these changes, they must also recognize the importance of maintaining healthy cash flows to ensure operational success.

Fostering partnerships based on trust and timely payments will not only benefit individual companies but will also contribute to a more robust and resilient transport sector as a whole.

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