Public debt: what to do when the government owes you money

You might be surprised by this, butlate paymentof debts bypublic bodiesis actually fairly common. The government all too often slips into the role ofbad payerandrecovering a debtfrom the state can be complicated for acreditordue to the reams of red tape typically intertwined with these institutional bodies.TCMoffers you a short guide to one of the more unexpected aspects of debt recovery.

The state doesn’t always lead by example

A contract signed with apublic bodycan have nasty surprises in store, as the government doesn’t always set a good example when it comes topayment deadlines. Indeed, many are the freelancers, SMEs and larger firms who could testify bitterly tolate paymentproblems which they’ve suffered at the state’s hands. In 2017, one in three invoices (33%) was settled late by Belgium’s federal public services (FPS), and the FPS Justice is the worst offender in this regard, failing to pay two out of three invoices on time. So this is far from being an exceptional or isolated phenomenon.

The consequences of these late payments

Thesepayment delaysoften cause cash flow problems for the individuals or businesses concerned, which are sometimes unable to settle their owndebtsor obligations (VAT, corporation tax, etc.). They are also forced to spend time and money trying to recover what’s owed to them. What’s more, these late payments also have consequences for the budgets of thegovernment bodiesthemselves. In 2017, for instance, Belgium’s public bodies paid out a total of 6 million euros inpenalty interest.

Just like any other contract

Generally speaking, winningcommercial contracts with government bodiesoffers you a certainguaranteeof being paid, but unfortunately the payment periods are often much longer than in the private sector. Basically though, acontract signed with a government bodyis still justa standard commercial contract, subject to the samelaw on combating late payment in business transactions(imposed by the EU despite reservations expressed by both Belgium and Portugal, applicable since August 2002 and including exceptions for public bodies). This law stipulates damages and interest in the event of late payment, but there’s nothing to prevent you strengthening your own protection againstnon-payment risksandpayment delays. As with any other client, you can draw up a solid contract and includecontractual clausesthat guarantee you a degree of protection as acreditor. Given that one of the key rules forreducing non-paymentrisks is to firstresearch your debtor, and since it’s public knowledge that official institutions tend to pay their invoices late, it’s crucial that you anticipate and make provision for this eventuality. The advantage of having a contract with a Belgian public body is that in most cases, the risk of insolvency is virtually non-existent. You will be paid late, but you will be paid in the end, normally with damages and interest on top. Would you like to know whatTCMcould do for you regarding apublic debt? We are here to help, so don’t hesitate tocontactus.

Public debt: what to do when the government owes you money

You might be surprised by this, butlate paymentof debts bypublic bodiesis actually fairly common. The government all too often slips into the role ofbad payerandrecovering a debtfrom the state can be complicated for acreditordue to the reams of red tape typically intertwined with these institutional bodies.TCMoffers you a short guide to one of the more unexpected aspects of debt recovery.

The state doesn’t always lead by example

A contract signed with apublic bodycan have nasty surprises in store, as the government doesn’t always set a good example when it comes topayment deadlines. Indeed, many are the freelancers, SMEs and larger firms who could testify bitterly tolate paymentproblems which they’ve suffered at the state’s hands. In 2017, one in three invoices (33%) was settled late by Belgium’s federal public services (FPS), and the FPS Justice is the worst offender in this regard, failing to pay two out of three invoices on time. So this is far from being an exceptional or isolated phenomenon.

The consequences of these late payments

Thesepayment delaysoften cause cash flow problems for the individuals or businesses concerned, which are sometimes unable to settle their owndebtsor obligations (VAT, corporation tax, etc.). They are also forced to spend time and money trying to recover what’s owed to them. What’s more, these late payments also have consequences for the budgets of thegovernment bodiesthemselves. In 2017, for instance, Belgium’s public bodies paid out a total of 6 million euros inpenalty interest.

Just like any other contract

Generally speaking, winningcommercial contracts with government bodiesoffers you a certainguaranteeof being paid, but unfortunately the payment periods are often much longer than in the private sector. Basically though, acontract signed with a government bodyis still justa standard commercial contract, subject to the samelaw on combating late payment in business transactions(imposed by the EU despite reservations expressed by both Belgium and Portugal, applicable since August 2002 and including exceptions for public bodies). This law stipulates damages and interest in the event of late payment, but there’s nothing to prevent you strengthening your own protection againstnon-payment risksandpayment delays. As with any other client, you can draw up a solid contract and includecontractual clausesthat guarantee you a degree of protection as acreditor. Given that one of the key rules forreducing non-paymentrisks is to firstresearch your debtor, and since it’s public knowledge that official institutions tend to pay their invoices late, it’s crucial that you anticipate and make provision for this eventuality. The advantage of having a contract with a Belgian public body is that in most cases, the risk of insolvency is virtually non-existent. You will be paid late, but you will be paid in the end, normally with damages and interest on top. Would you like to know whatTCMcould do for you regarding apublic debt? We are here to help, so don’t hesitate tocontactus.