A business interview.
(photo credit: INGIMAGE)
The cabinet on Sunday approved a plan to expedite government payments to suppliers, an effort to ease strain on the small and medium suppliers in particular.
The bill would require government ministries to make payments with 30 days of the invoice being received, while local authorities will have half their current 90 days to make payments. Infrastructure projects will have longer payment schedules: 70 days for ministries and 90 for local authorities. Exceptions will apply when the funding source comes from outside the government. Other public bodies, such as government companies and educational institutions, will have a 45-day limit.
The government will be forced to pay interest on late payments.
“This is an important law that will benefit businesses, strengthen them, and solve many credit crises for businesses in the country," said Prime Minister Benjamin Netanyahu in his capacity as Economy Minister.
Small and medium businesses, he noted, struggle to get additional credit simply because their vendors take so long to pay them. Since small businesses generally pay high interest on credit, the delayed payment schedule put them at a particular disadvantage against larger companies.
A 2014 report found that two-thirds of government payments to suppliers were late, and many had policies extending to three or four months after the invoice to issue payments. In 2015, it took the government an average of 72 days to make payments.
"Regulating the payment ethic in the economy will allow small businesses to invest their resources in what they need – marketing, product development, and increasing their number of clients," Netanyahu said.
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Finance Minister Moshe Kahlon expressed his hope that when the government leads by example, the private sector will follow suit as well.
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