Organisations that fail to pay bills on time could soon face stringent penalties, after MEPs backed a new late payments directive on 19 October 2010.
After negotiations with the Council of Ministers, the European Parliament has agree to the draft law that would force both private and public sector organisations to pay bills for goods or services within a 30 day deadline.
However member states have agreed an exemption for public services in the healthcare sector who would have 60 days in which to pay.
Other public bodies may only have an exemption from the 30 day rule in "objectively justified" cases.
Industry Commissioner Antonio Tajani told MEPs that late payments cost businesses around 300bn a year, and that it has been a growing problem.
The Federation of Small Businesses (FBS) has said that in 2008 about 4,000 British firms collapsed due to late payments.
British conservative MEP Malcolm Harbour, who chairs the Internal Market Committee, welcomed the inclusion of the public sector into the scope of the directive.
He said letting public authorities off the hook would have been "devoid of meaning".
After overwhelming approval by 612 votes to 12 at the
on 20 October 2010, member states will have two years to implement the new measures.
However the parliament's rapporteur on the directive, German social democrat Barbara Weiler, said countries should start implementing it in January.
at Democracy Live's guide to the European Parliament plenary sessions.