Payment terms: adapt your price (and mind set)

Next post Monday October 31st

Payment terms can be a problem for someone willing to start a business in Italy. It’s a factor you should consider because it’s a major hurdle for every Italian company.

It’s hard to say where it all begun, but the situation can find at present the first ring of the chain in the Italian government.

As you may now the Italian institutions represent one of the biggest market: the health system is mainly owned by the state and both government agencies (Army, Police, Carabinieri just to name some) the local government (Regioni, Provincie, Comuni) are big clients for a lot of products and services.

Since many of them have a complicated financial situation, to put it mildly, many of them tend pay their suppliers with… some delay. Some Regions, especially in the South, have payment terms which are closer or even worst to one year.

Yes, that is not a typing mistake: I’m talking of more than 365 days from the invoice.

You can imagine the kind of problems generated by this delay, and if you go upstream from these clients to the supplier’s suppliers and so on, well, everyone try to pay when and only when they have received the money from the downstream ring of the supply chain.

In the end that means that the average payment delay time is around 100 days. Some large Italian companies set the trend: Fiat is paying its supplier usually around 180 days, just to provide an example.

So do not expect to agree a delayed payment lower than 30 days.

And then when the due time is elapsed… start calling.

It’s a very bad Italian habit to delay further the payment until when you have called several time to remember the client that actually she/he has to pay you.

It’s not a dishonest behavior, although I confirm it’s really unfair. I mean, you do not have to fear (too much) for your due money, just work hard to get it.

I’m exaggerating, just a lit bit though, to provide you the right taste: do not expect easy money. You can make a lot of good business, but in any case worst paid than in your country.

So if you are considering to sell in Italy, sit down and estimate the cost so that you can adapt your price accordingly.