Upcoming Changes to Payment Terms, Payment reporting and E-Invoicing Regulations across Europe

Payment terms

The European Union (EU) is overhauling its late payment directive (2011/7) to address persistent issues such as the inconsistent member state interpretation, weak enforcement, SME lack of awareness, ineffective penalties, and the absence of real time reporting.

A proposal for a new regulation, directly applicable across EU member states, is being reviewed by the EU parliament and Council. Whilst at this stage, there is no firm timeline set, we would expect this topic to gradually develop as government and businesses answer consultations on proposed changes including:

1. Maximum payment terms for business-to-business (B2B) and government-to-business (G2B) transactions could be reduced from 60 to 30 days.
2. Interest and compensation fees for late payments will be automatic and compulsory.
3. Member states must establish authorities to monitor compliance, investigate complaints, and issue sanctions,and will be encouraged to use digital tools for enforcement.
4. Companies may be required to disclose payment practices, enhancing transparency.

Payment Practice reporting

While the EU has been focused on establishing a framework to improve transparency and fair business practices, particularly with regard to payment terms, some countries have introduced further transparency measures. France and Germany already require companies to report payment terms and performance. Outside the EU, the UK is tightening payment practices and performance regulations. Since January 2025 the key updates include:

1. Companies must disclose the total value of payments not made within agreed terms
2. Firms must report the percentage of payments not paid within agreed terms due to disputes

From October 2025, the regulation will become more stringent. Suppliers bidding on major UK contracts (exceeding £5 million per year) must demonstrate that, in at least one of the past two six-month periods, their average payment days are 45 or fewer and that 95% of invoices are paid within 60 days.

E-Invoicing

E-invoicing has been on the EU’s radar for years. Tax authorities across the globe are rapidly capitalising on technology advancements, closing tax compliance gaps and driving transparency.

The Directive 2014/55/EU adopted in 2014 was mainly aimed at promoting e-Invoicing in business-to-government (B2G) transactions. However, following the introduction of changes to existing Directive 2006/112/EC with regard to VAT in the Digital Age (ViDA), aimed at modernising tax compliance and combatting VAT fraud, some countries such as, Romania and Germany have already made e-invoicing mandatory. Other countries such as Greece, Croatia, Belgium and Poland are following a similar move. Outside the EU, the UK has launched a consultation aimed at gathering insights from the business community on standardising e-invoicing and promoting its wider adoption.

The EU’s proposed ViDA directive, set for 2028, will further accelerate change, with broader e-invoicing mandates likely from 2030. Key developments include

1. More businesses, regardless of size, will be required to issue and process invoices electronically.
2. Uniform e-invoicing formats, such as PEPPOL and EN16931, will become mandatory, facilitating cross-border transactions.
3. Businesses may need to submit e-invoices in real time or near real time to tax authorities, enhancing transparency.

For multinational businesses, operating across different countries, the combination of complexity and fast-changing requirements landscape increases the risk of falling into a ‘whack-a-mole’ scenario, where e-invoicing compliance challenges and regulatory updates constantly emerge.

Implications for businesses

The coming reforms will significantly impact working capital management, cash flow, and commercial flexibility. The proposed regulatory changes should not just be regarded as a regulatory hurdle or administrative burden, but as an opportunity and a strategic lever to transform the approach to working capital management, to drive operational process efficiencies which in turn can lead to improved customer and supplier relationships and more broadly enhanced supply chain relationships.

The breadth of change will continue to give businesses plenty to think about: Are my processes fit-for-purpose? Is my IT infrastructure optimised to meet the various regulatory requirements for e-invoicing, payment reporting, late payment charges? What will be the commercial impact of non-compliance? How will my receivables, payables and net working capital be affected? Who does the ownership of these processes sit with in the organisation?

Key areas of impact and how to best prepare

• Companies relying on extended payment terms must rethink their approach. This may involve renegotiating supplier agreements, optimising receivables and inventory performance to offset the cash impact, and / or exploring alternative financing solutions.
• With shorter payment deadlines, compulsory interest charges for late payment, more detailed payment practice reporting and mandatory e-invoicing, businesses should embrace the opportunity not just to comply but to transform and automate.
• To comply with new regulations and avoid financial penalties or reputational damage, businesses should strengthen governance frameworks, stay informed, review contracts, establish clear reporting and KPIs and ensure standards are met.

How can PwC help?

In our experience, acting early reduces disruption and positions businesses to take advantage of the improved cash flow and operational efficiencies these reforms are designed to deliver.

At PwC, we specialise in working capital optimisation, regulatory compliance, and process transformation. We are well placed to help redefine policies, redesign processes, build insights, design and deploy the right technology, and manage change. Our latest Working Capital Study highlights the growing impact of some of these regulations on working capital.

If you have questions about how these upcoming changes could affect your operations, reach out to our team. We’re here to help you turn challenges into opportunities.