Average payment period to suppliers

Organic Law 2/2012, of 27 April, on Budgetary Stability and Financial Sustainability introduced the concept of the average payment period as an expression of the payment time or delay in the payment of commercial debt.

The implementation of this Law, approved by means of Royal Decree 635/2014, of 25 July, was amended by Royal Decree 1040/2017, of 22 December, implementing the methodology for the calculation of the average payment period by public authorities to suppliers and the conditions and procedure to withhold the revenue of financing regimes, provided for in Organic Law 2/2012, of 27 April.

According to this amendment, the average payment period is calculated by means of the following formulas:

• Average payment period of each entity = (ratio of operations paid x total amount of payments settled) + (ratio of operations pending payments x total amount of pending payments) / (total amount of payments settled + total amount of pending payments).
• Ratio of operations paid = Ʃ (number of days to settle payment x amount of the operation paid) / total amount of payment settled.

The number of days to settle payment shall be understood as the calendar days elapsed from the date of the entry of the invoice in the administrative register or from the date of approval of the monthly work certificate, as appropriate, to the date of material payment by the public authority.

• Ratio of operations pending payment = Ʃ (number of days pending payment x amount of the operation pending payment) / total amount of pending payments.

The number of days pending payment shall be understood as the calendar days elapsed from the date of the entry of the invoice in the administrative register or from the date of approval of the monthly work certificate, as appropriate, to the last day of the period the information refers to.

As a result of this new method of calculation,  there will no longer be negative payment periods, as occurred previously, since 30 days will not be added to the date of the entry of the invoices in the register.

This amendment entered into force on 1 April 2018, whereby the month of April 2018 is the first month calculated under this new methodology.