Seven out of ten small businesses believe that reducing the legal payment deadline for deliveries from the current 60 days would benefit their management.
According to a survey conducted by the Korea Federation of Small and Medium Businesses from July 21 to 24, which involved 500 small businesses engaged in consignment transactions, 71.0% of the respondents indicated that a shorter legal payment deadline would be 'helpful' for their management.
By industry, 90.0% of manufacturing firms reported that a reduction in the legal payment deadline would be beneficial. This was followed by 71.9% in the construction sector and 30.9% in retail.
Businesses that found a shorter payment deadline helpful cited 'improved cash flow' (55.3%) and 'smoother payments from clients' (40.9%) as their main reasons. Manufacturing and construction firms emphasized improved cash flow, while retail businesses highlighted smoother client payments as their primary concern.
In the past year, 53.7% of consignment businesses reported receiving payment within 30 days. Among consignors, 62.6% stated they paid within the same timeframe. Under current cooperative and subcontracting laws, the payment deadline for deliveries is set at 60 days.
When asked about the burden of having to pay sooner if the payment deadline were shortened, 41.6% of consignors responded that it would be 'average,' while 32.7% said it would not be difficult.
Regarding the ideal legal payment deadline, 60.6% of businesses identified '30 days' as the most appropriate, followed by 15 days (18.0%) and 45 days (9.4%).
As for the preparation time needed to implement a shorter payment deadline, 46.8% of respondents said it could be enacted 'without a grace period.' Meanwhile, 27.0% indicated that 'six months' would be necessary, and 22.8% said 'one year' would be required.
The most needed support policy for shortening payment deadlines was 'low-interest loans and expanded guarantees,' cited by 58.4% of respondents. This was followed by 'shortening the maturity of payment methods such as accounts receivable and promissory notes' (24.0%) and 'expanding support for early cash conversion of accounts receivable through factoring and insurance' (16.2%).
Yang Chan-hwa, executive director of the Korea Federation of Small and Medium Businesses, stated, "Shortening the payment deadline for deliveries will enhance liquidity for small businesses and alleviate financial difficulties, thus providing practical assistance for business management." He added, "However, in some industries where major buyers have long payment periods, there may be a time lag between receiving and making payments. Therefore, it is necessary to consider the transaction structure by industry and implement complementary measures such as low-interest loans and expanded guarantees."
* This article has been translated by AI.
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