Coronavirus hinders collection of receivables for businesses

Download video statement by Dejan Vuković via WeTransfer

It takes an average of a year and seven months for businesses in Serbia to collect the receivables owed to them, which negatively impacts their ability to settle their regular liabilities. It is certain that the emergence of coronavirus will further prolong the collection and make the problem worse, particularly in a situation where courts and other state institutions are not working in full capacity. 

On the other hand, the state could help and mitigate the potential rising illiquidity by settling their liabilities to the businesses, which has been one of the frequent appeals made by businesses to line institutions since the emergence situation has been introduced. 

- It is hard to estimate how the coronavirus pandemics will influence the liquidity of our businesses. The economic situation, the same as health, is monitored day by day. It is expected that the same situation will be seen in the entire Europe. It is interesting, however, that even before, Serbian companies have normally initiated court proceedings only after waiting for nine months (264 days), while their European colleagues are three times faster, and normally take this step after waiting for 82 days - says Dejan Vuković, Vice President of NALED's Property and Urbanism Alliance and the founder of Law office Vuković and partners, reflecting on the European Payment Report 2018.

Vuković highlights that the situation regarding the collection may be improved after the pandemics with the amendments to the Law on Enforcement and Security. The Law, whose development involved NALED as one of the members of the Working group, came into force on 1 January 2020. Besides the legal framework, a part of responsibility is to be borne by businesses themselves. 

- If the epidemics is stopped relatively quickly, businesses could influence the length of collection procedure themselves, by taking cases to court earlier. However, even before, companies here have been inclined to try and settle the debts off-court, thus avoiding the costs of proceeding which amounts to 40% of the receivables' value, according to the Doing Business report – says Vuković, adding that one of the preconditions for efficient collection of receivables includes their proper treatment. 

According to him, this means that the status of receivables should be monitored from the date the invoice was issued to the date of final collection. If the collection introduces too high expenses, a possible solution could to be to hire specialized companies performing this type of activities, mediators, lawyers and private enforcers, which have been allowed by the new Law to facilitate voluntary collection.

When it comes to the reasons of not settling debts, the European Payment Report 2018 states lack of finance as the main reason. And while half of companies in Europe (54%) are late with payments due to financial problems, this is much more common in Serbia, with 72% businesses being late to settle their debts for this reason. 

Another major problem refers to the administrative delays („I forgot about the invoice“), faced by one in three companies (34%), while a quarter (26%) is experiencing illiquidity due to intentional delays in payment. Only one in ten companies (11%) have not collected their receivables due to a court dispute regarding the provided goods or services.

Prema izveštaju Doing business 2020 privreda je u proseku naplaćivala potraživanja za 622 dana, što je blagi napredak u odnosu na prethodnu godinu, kada je bilo potrebno 12 dana više.

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