Payment backlogs are still a big problem in Polish transport

Delays in settling receivables between companies are a serious challenge for the Polish economy. Payment backlogs are particularly painful for companies in the transport sector, where failure to receive receivables on time can lead to a loss of financial liquidity and, in extreme cases, even bankruptcy.

Although failure to pay invoices on time may result in consequences in the form of late payment interest, inclusion on the list of debtors or debt collection, this is unfortunately a fairly common phenomenon in the Polish economy. According to the SME Scanner study for BIG InfoMonitor, nearly 94% of enterprises in Poland are struggling with payments that have not been settled on time. According to data from the BIG InfoMonitor Debtors Register and the Credit Information Bureau (BIK), at the end of April 2024, arrears of companies from various industries exceeded a record PLN 44 billion.

The scale of the problem in the transport sector

In terms of the scale of debt, the transport sector is the inglorious leader. Over the past year, transport arrears have increased by almost 20%, which is one of the highest rates among the sectors of the economy analyzed.

The Skaner SME survey shows that more than half of transport companies experience payment delays exceeding 30 days, and 48% of them wait for receivables for more than 60 days (among all SMEs, this percentage is 35%). Such delays lead to a domino effect, where the lack of timely payments from contractors prevents companies from settling their own liabilities. According to data from the BIG InfoMonitor Debtors Register and the BIK database, the transport sector’s debt already amounts to PLN 3.2 billion and consists of over 37 thousand entities. The conclusions are not optimistic, because such a scale of debt means that almost every tenth transport company is experiencing serious financial problems.

Causes of payment delays in transport

The growing payment backlogs in the transport sector are being influenced by several key factors. Among them, the long payment terms on invoices, which result from the specifics of the industry and are one of its biggest pain points, should be mentioned first and foremost. Freight transport is a multi-stage and long process, often involving several entities, which has a negative impact on the fluidity and speed of the settlement process. Moreover, the final payment deadline is influenced by additional factors, such as the deadline for delivering the original shipping documents to the payer.

It is also significant that the transport sector recorded a several percent drop in demand for its services last year, with operating costs rising at the same time. Fuel prices, fleet maintenance costs and employee wages are subject to fluctuations, which affects the financial burden on transport companies. At the same time, Polish transport is struggling with unequal competition from across the eastern border. According to some experts, all these factors mean that Polish carriers are taking on increasingly risky orders, and are also trying to gain a competitive advantage through long terms of deferred payments and turning a blind eye to payment delays.

Another reason is the lack of effective debt collection tools. Unfortunately, smaller companies often do not have the resources to effectively collect receivables from contractors.

Consequences of payment backlogs in transport

Late payments in the transport sector lead to a number of negative consequences for individual companies, as well as for the industry as a whole. The first thing to mention is the loss of financial liquidity. Lack of funds for current operational activities can lead to delays in order execution and, in extreme cases, even to suspension of operations. Another effect is an increase in debt. Transport companies are forced to take out loans or use other forms of financing, which increases their debt and financial burden. Both of these inevitably lead to a decrease in the competitiveness of Polish transport companies. Companies that struggle with financial problems have fewer investment opportunities, which limits their development and ability to compete on the market.

Legislative actions and their effectiveness

In response to the growing problem of payment defaults, an amendment to the Act on Combating Excessive Delays in Commercial Transactions was adopted, according to which entrepreneurs generating payment defaults may receive penalties. However, it turns out that in 2022, 32 decisions were made on penalties for late payments, in 2023 this number increased to only 39. This means that despite the tightening of regulations, the problem of payment defaults still remains unresolved.

The European Commission is proposing to further tighten the regulations by limiting the permissible payment terms to 30 days and introducing mandatory penalties for late payments. The aim of these actions is to protect small and medium-sized enterprises from the unfavourable practices of large entities. The regulation on combating late payments in commercial transactions was adopted by the European Parliament on 23 April 2024.

The Polish Ministry of Infrastructure wants to go a step further. As we learn from a letter from Secretary of State Stanisław Bukowiec, the draft act amending the Road Transport Act and certain other acts (UD 18) provides for a 14-day payment period for the performance of the transport of goods. The parties to the agreement will be able to extend the payment deadline to 30 days in agreement. The project is currently being processed by the Ministry of Infrastructure and, according to a representative of the ministry, is to enable greater financial liquidity for transport companies.

Recommendations for transport companies

Transport companies can take certain actions that will allow them to minimize the risk of payment backlogs now. These include: thorough verification of contractors before starting cooperation, striving to establish shorter payment terms.