According to the report on activities in 2023 published by the Office of Competition and Consumer Protection in April, the Office imposed fines on entities causing payment backlogs last year in the total amount of over PLN 41 million. This is four times more than in 2022. The highest fines, ranging from PLN 3 to 7.5 million, were imposed on three companies operating in Poland from the automotive sector. However, UOKiK analyses show that major payment problems occur, among others, in the cosmetics and electromechanical industries, as well as in food processing.
– When it comes to payment arrears, the UOKiK is primarily interested in larger companies with arrears of at least PLN 2 million – notes Marek Wcisło, Partnership Director at 4Trans Factoring, a fintech specializing in ensuring financial liquidity for companies in the transport and logistics industry. – From an economic point of view, this is justified, because larger entities can be in arrears with payments to many contractors at the same time. Such a situation can cause a snowball effect – companies that do not receive payments on time lose financial liquidity and cannot settle their financial obligations on time – he adds.
Delinquent contractors are a significant threat, especially for smaller companies. Looking for a way to protect themselves against this, many companies reach for factoring. This method of flexible financing allows you to quickly obtain cash for invoices issued with a deferred value date.
In short, this service consists of the entrepreneur (factorer) assigning receivables from invoices with extended payment terms to the service provider (factor) and receiving most of the amount for them. And when the contractor pays the factor in full, the factor transfers the remaining amount (less the commission) to the invoice issuer.
As shown by data from the Polish Factors Association, at least 26.3 thousand companies, mostly small and medium-sized, used factoring in Poland in 2023. Entrepreneurs who issue invoices with long payment terms financed invoices worth a total of PLN 450 billion in this way.
Factoring services come in many types and varieties, but the most important division criterion seems to be whether the factoring company assumes the risk of the contractor’s insolvency.
In a situation where we are dealing with recourse factoring, failure to pay the invoice on time means that the entrepreneur must return the previously received money to the financing factor and pursue the receivables from the debtor himself.
A much more beneficial solution for entrepreneurs is full (proper) factoring. In this type of service, the factor takes over all the risk and, in the event of payment problems, takes the necessary actions. Additionally, such receivables are usually insured, so in the event of the contractor’s insolvency, they are covered by the insurance company.
– Non-recourse factoring is a solution that can really give entrepreneurs peace of mind about their financial liquidity. When invoices are additionally insured, even if the contractor does not pay them, the insurer can at least partially compensate for the loss – explains Marek Wcisło. – If you do business with entities from other countries, it is also worth making sure that the selected factoring company handles payments in the appropriate currencies. Then we will avoid the risk related to exchange rate fluctuations – he adds.
Source: 4Trans Factoring