State improves its payment ethic
The state is trying to help out the business community by improving its own payment ethic. The accountant general of the Finance Ministry, Yaron Zelekha, published a directive this week that brings order to the way the state pays its suppliers.
The new requirements shorten the payment period from 30 to 60 days after the transaction is completed to only 25 to 45 days from the work's completion. This means that, on average, the number of days of credit provided to the state will drop by 10, and will now be about 35 days.
In addition, the directive fixes set times for making payment. According to the new schedule, bills presented to the state between the 1-15 of the month will be paid on a single, fixed day: the 15th of the following month. Bills presented between the 16-24 of every month will be paid exactly 30 days later - on the same day of the following month.
Bills presented between the 25-31 of the month will be paid on a single date: the 24th of the following month. This translates into 24-29 days of credit.
The change means that not only will the number of days that businesses wait for payment will drop, they will also know exactly when they will receive their money from the state.
Businesses will also be able to advance the payment date, if they are willing to pay interest, but such interest will be set in advance.
It is expected that the changes will improve the services provided by the state to suppliers, and will help businesses - and in particular small and medium sized ones - to improve their cash flow management, alongside reducing their financing costs.
Zelekha's directive is also intended to reduce the state's costs. Today, most tax revenues are collected between the 15th to 20th of the month, but its payments are spread out all over the calendar. This requires the state to keep large amounts of cash over the entire month, and thereby lose out on this money's interest income.
By concentrating most of the payments in the period of the 15-24 of the month, spending will overlap with revenues.
The directive is one of a series of steps taken by the Accountant General's Office to reform government cash flow. The Treasury hopes that these steps will save hundreds of millions of shekels in interest every year.