Seven out of 10 small and midsize businesses said shortening the payment deadline for supply prices from the current 60 days would help their operations. As the appropriate statutory payment deadline, "30 days" was the most cited.
According to the Korea Federation of Small and Medium Enterprises , on July 21-24, a survey of 500 small and midsize businesses engaged in principal-subcontractor transactions on "the actual conditions related to shortening the payment deadline for supply prices" found that 53.7% of subcontractors received payment within 30 days over the past year.
Among principal companies, 62.6% paid within 30 days.
The current Win-Win Cooperation Act and the Fair Transactions in Subcontracting Act require supply prices to be paid within 60 days from the date goods are received. Among subcontractors, 97.3% received payment within 60 days, and 99.4% of principal companies paid within 60 days.
Asked about the impact on management if the statutory payment deadline were shortened from the current 60 days, 71.0% of subcontractors said "it would help." "Average" was 19.2%, and "it would not help" was 9.8%.
As the biggest expected effect, "improved cash liquidity" was most frequent at 55.3%, followed by "smooth payment of transaction partner prices" at 40.9% and "reduced financial costs such as loan interest and fees" at 1.8%.
Meanwhile, 25.7% of principal companies said shortening the payment deadline would be "difficult." Among them, 74.1% cited "securing working capital and worsening short-term liquidity" as the greatest anticipated challenge.
As the appropriate statutory payment deadline for supply prices, "30 days" was the highest at 60.6%, followed by "15 days" at 18.0% and "45 days" at 9.4%.
Regarding when to implement the system, 46.8% said it can be implemented without a grace period. Responses saying six months of preparation are needed came to 27.0%, and one year was 22.8%.
As a support policy needed for shortening the payment deadline, "low-interest working capital loans and expanded guarantees" was the most cited at 58.4%.
Yang Chan-hoe, executive director of KBIZ, said, "Shortening the due date for paying supply prices is expected to provide practical help in improving corporate management by expanding the liquidity of small and midsize businesses and easing funding difficulties," and added, "It is necessary to concurrently implement complementary measures such as low-interest working capital loans and expanded guarantees, taking into account the transaction structure by industry."