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

You might be surprised by this, but late payment of debts by public bodies is actually fairly common. The government all too often slips into the role of bad payer and recovering a debt from the state can be complicated for a creditor due to the reams of red tape typically intertwined with these institutional bodies. TCM offers you a short guide to one of the more unexpected aspects of debt recovery.

Palace of justice Bruxelles TCM

The state doesn’t always lead by example

A contract signed with a public body can have nasty surprises in store, as the government doesn’t always set a good example when it comes to payment deadlines. Indeed, many are the freelancers, SMEs and larger firms who could testify bitterly to late payment problems 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

These payment delays often cause cash flow problems for the individuals or businesses concerned, which are sometimes unable to settle their own debts or 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 the government bodies themselves. In 2017, for instance, Belgium’s public bodies paid out a total of 6 million euros in penalty interest.

Just like any other contract

Generally speaking, winning commercial contracts with government bodies offers you a certain guarantee of being paid, but unfortunately the payment periods are often much longer than in the private sector.

Basically though, a contract signed with a government body is still just a standard commercial contract, subject to the same law 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 against non-payment risks and payment delays. As with any other client, you can draw up a solid contract and include contractual clauses that guarantee you a degree of protection as a creditor.

Given that one of the key rules for reducing non-payment risks is to first research 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 what TCM could do for you regarding a public debt? We are here to help, so don’t hesitate to contact us.

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

You might be surprised by this, but late payment of debts by public bodies is actually fairly common. The government all too often slips into the role of bad payer and recovering a debt from the state can be complicated for a creditor due to the reams of red tape typically intertwined with these institutional bodies. TCM offers you a short guide to one of the more unexpected aspects of debt recovery.

Palace of justice Bruxelles TCM

The state doesn’t always lead by example

A contract signed with a public body can have nasty surprises in store, as the government doesn’t always set a good example when it comes to payment deadlines. Indeed, many are the freelancers, SMEs and larger firms who could testify bitterly to late payment problems 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

These payment delays often cause cash flow problems for the individuals or businesses concerned, which are sometimes unable to settle their own debts or 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 the government bodies themselves. In 2017, for instance, Belgium’s public bodies paid out a total of 6 million euros in penalty interest.

Just like any other contract

Generally speaking, winning commercial contracts with government bodies offers you a certain guarantee of being paid, but unfortunately the payment periods are often much longer than in the private sector.

Basically though, a contract signed with a government body is still just a standard commercial contract, subject to the same law 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 against non-payment risks and payment delays. As with any other client, you can draw up a solid contract and include contractual clauses that guarantee you a degree of protection as a creditor.

Given that one of the key rules for reducing non-payment risks is to first research 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 what TCM could do for you regarding a public debt? We are here to help, so don’t hesitate to contact us.

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