Thanks to stricter legal payment terms, you will get paid faster.

They are big and I am small and that is not fair…

As an entrepreneur, landing a big contract or a big company is always great. Collaborations with big clients are often financially interesting and having some nice names on your record is a great sales argument for the future.

However, in our practice we often see that it is difficult for smaller companies to negotiate balanced contracts with clients who are economically much stronger. Often, the contract is ‘take it or leave it’ and you, as an entrepreneur, are obliged to accept very unfavourable conditions if you actually want to land the contract.

This has already improved considerably with the Act of 4 April 2019 (the new “B2B Act”), which imposed strict rules to combat abuses of dominant position, unfair market practices and unbalanced contractual terms between entrepreneurs.

 

Getting paid quickly is not easy

One of the typical problems that small(er) companies encounter is the sometimes very long payment terms with multinationals or large players. As a self-employed person or an SME, a smooth cash flow is often very important to keep your company healthy and you would therefore prefer to be paid as quickly as possible. With big companies, however, contractually imposed payment terms of 60 or 90 or even 120 days are more the rule than the exception to it.

Two thirds of companies and the self-employed in Belgium say that they sometimes have to accept payment terms that are much longer than they would like, despite the fact that this often creates liquidity problems for them.

It is true that legislation already provides for a standard payment term of 30 days between entrepreneurs (see the Belgian Law of 2 August 2002 on late payments in commercial transactions), but companies can and could contractually deviate from this.

This law has already been tightened up considerably in 2019 to ensure that the payment term in contracts between big companies on the one hand and SMEs or the self-employed on the other is always limited to 60 days. Since 2019, anyone who contracts as a non-SME with an SME or self-employed person must respect the statutory payment term of 30 calendar days. However, this term could still be extended if a contractual period was provided for “verification of the goods”. That period could be no more than 30 days and the payment period (of no more than 60 days) only started to run thereafter.

Conversely, SMEs could and may (try to) apply longer deadlines to big companies.  Any deviation in contract or general conditions to the disadvantage of the SME or self-employed person is and was null and void.

New tightening as of February 2022

In practice, the 2019 amendments prove insufficient to provide real protection for small(er) companies. Over the past two years, a practice has developed whereby big companies almost always provide a 30-day “verification period” to check invoices before the payment term starts running. Only then does the payment period (of up to 60 days) begin to run. As a result, SMEs and the self-employed often still have to wait 90 days for payment in practice.

This legal loophole will also be closed soon. From February 2022, the combination of a 30-day verification period and a 60-day payment period will be prohibited. The maximum period for which suppliers will have to wait for their money will then be 60 days from the invoice date.

The new law also prohibits contractual terms and conditions that artificially postpone the date of receipt of invoices, thereby delaying the start of the verification or payment deadlines. Moreover, the client will be legally obliged to provide, in good time, all the information that will enable the supplier to draw up his or her invoice. This will also make it impossible to drag out time, for example by not providing the supplier with a P.O. number in time.

 

Not only for SMEs!

It is important to note that the new rules are not only for the benefit of SMEs and the self-employed, but that they apply to all commercial agreements, regardless of the size of the company and (for the first time) also with regard to the government (traditionally a very slow payer). So, your current agreements with your suppliers and your own general terms and conditions and standard contracts may also have to be adjusted.

 

No deviations possible

Contractual deviations from this new rule are not possible and clauses in contracts that do provide for longer periods are simply null and void.

 

What about existing agreements?

As a service provider, it is best to check your general terms and conditions and your current long-term contracts with customers before the end of 2021, so that you can make the necessary adjustments in time. After all, all conditions that are contrary to the new law will simply be regarded as unwritten and that can lead to unexpected surprises in later discussions with bad payers.