Debt collection in Italy: tips for businesses
In some countries, it is common practice to pay creditors with a certain delay, up to several days after the invoice due date. Establishing relationships with Italian companies represents an interesting business opportunity for those wishing to develop their business internationally.
However, this must be done with a thorough understanding of the risks involved, and the preventive measures that can be taken to protect oneself.
General comments on payment behaviour in Italy
In Italy, the payment behavior of domestic companies is problematic, with excessive average payment terms.
Paradoxically, regulations on late payment are stricter in Italy than the applicable EU rules.
The delays and high costs associated with enforcing court decisions represent a major challenge.
Consequently, taking legal action without first establishing an out-of-court collection strategy is hardly reasonable.
Although debt renegotiation mechanisms are available for insolvent debtors, they remain largely under-utilized.
As a result, liquidation (bankruptcy) often remains the only option.
As a result, recovery possibilities are limited to unsecured creditors.
Some figures on payment behaviour in Italy
Before entering into a business relationship with Italian companies, it’s important to find out about the country’s payment habits.
Like Spain, Italy is one of the worst payers in Western Europe.
In particular, it is rated A2 “Medium Risk” by Allianz Trade‘s 2022 study.
- The average DSO in 2021 was 75 days[1].
- The legal payment term for invoices is 30 days.
- It is not uncommon for payment terms to exceed 100 days.
- A payment period of 7 days is usual after a payment reminder has been sent.
Solutions to protect your business when trading with Italy
In view of the information on payment behavior in Italy, it is important for companies considering working with Italian businesses to protect themselves throughout the customer relationship.
Upstream, carrying out checks on the company is a good way of verifying its financial stability.
To this end, you can turn to various rating services which will provide you with the information you need to make a decision.
In particular, there are companies offering international credit reports, enabling you to find out about the financial situation of a foreign company.
If you choose to work with a foreign company, planning concrete, staggered reminder scenarios will be a good way of anticipating late payments.
It’s crucial not to let delays accumulate.
Finally, if despite your best efforts your invoice remains unpaid, you can turn to companies specializing in international debt collection.
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[1] https://www.allianz-trade.fr/content/dam/onemarketing/aztrade/allianz-trade_fr/news/200622/2022_06_20_Collection_Complexity_AZT_FINAL.pdf