An analysis of late payments in Malta

Abstract

Risks and market distortions created by payment delays influence the ability of businesses to trade overseas, apart from depleting the cash flow of a business. This can be an opportunity cost to a business to be more competitive and invest resources in research and development. The main objective of this dissertation is to find whether the problem of late payments exists amongst local Maltese firms. The aim of this study is achieved by carrying out a questionnaire to several businesses engaged in different economic activities, representing SMEs and large firms. The questionnaire covers three important aspects with regard to this area, mainly the general practices of the companies under study, the behaviour of the clients to such companies, and the knowledge regarding the laws that may apply in combating this problem. The research findings indicate that late payments are a problem to the local firms under study. Moreover, most companies under study are not knowledgeable about the institutional responses that may help companies fight the problems of late payments. However, these research conclusions can only be assessed to indicate the general trends and practices that may exist amongst the businesses that were surveyed, and the data applies only for the time period under review. Furthermore, this research concludes by suggesting other areas of study, and puts forward some recommendations that may be useful for these businesses.