1 – Introductory

This assessment looks at monetary claims arising from commercial transactions (sale of goods or services) that small businesses enter as creditors. It primarily deals with non-performing receivables, defined as accounts receivable that have become due but have not been paid by the debtor, either in whole or in part. Under some circumstances, an account receivable may become non-performing even before it becomes due. These situations mainly involve a deterioration in the debtor’s liquidity position, accompanied by an account freeze and enforced collection actions by other creditors and other similar circumstances. In addition, a receivable may be contested before it becomes due, with this being a strategy employed by illiquid debtors to delay payment. As such, non-performing payments are a broader concept than late payments.

MSMEs (micro, small and medium-sized enterprises) are crucial for an inclusive economy: they drive job creation, economic growth, and contribute to a stable economic and social environment. The Serbian MSME sector constitutes 99.8% (app. 400.000) of all enterprises, generates about two-thirds of total employment, contributes to app. 60% of value-added of the Serbian economy and creates app. 37% of total exports.

Late payments are a major challenge to the sustainability and financing of the MSME sector and cause many issues in the operation of businesses, the key problem being that they reduce creditor liquidity. Late payments usually generate major additional costs for creditors and make it difficult for these to manage their finances. They also have a devastating impact on cash flows, lead to substantial additional costs payable to banks, reduce opportunities for investment, and increase uncertainty for many creditors, especially MSMEs, which greatly affects their competitiveness, profitability, and sustainability, particularly at times when access to finance is constrained or poorly affordable. Late payments also often lead to knock-on defaults in paying suppliers and employees (which has significant adverse social effects), as well as paying taxes, customs duties, and social contributions (affecting public revenues). Lastly, they can make it more difficult to access finance[1] and lead to insolvency of otherwise sustainable firms, which can set off a cascade of bankruptcies along the supply chain, with significant adverse social and economic effects.[2]

Patterned after the European Union (EU) model, the Serbian legal system includes regulations designed to provide relief to creditors from late payment. The Law on Late Payments in Commercial Transactions[3] does not contain a definition of a non-performing account receivable, in contrast to banking regulations, which do provide a definition of a non-performing loan (NPL).


At a most basic level, monetary obligations, or receivables, can be divided into matured and not matured. A receivable is matured, or due, when the contractual or statutory time limit for its payment has elapsed. When a time limit is not determined, if the purpose of the transaction, the nature of obligation and the remaining circumstances do not require a specific time limit for fulfilment, the creditor may request immediate fulfilment of the obligation, while the debtor, on his part, may request from the creditor immediate acceptance of fulfilment (Article 314, Law of Contracts and Torts).[4] Moreover, the creditor is be entitled to request fulfilment before the time limit if the debtor fails to supply the creditor with a guarantee promised, or if the debtor, at the request of the creditor, fails to complete a guarantee reduced without fault of the creditor, or if the time limit is stipulated solely in the interest of the creditor (Article 315 LCT). The debtor is also allowed to fulfil an obligation ahead of time, in which case the debtor is entitled to deduct, from the amount of debt, interest covering the period from the date of payment to the date of maturity of the obligation, only where the debtor is permitted to do so by contract or business usage (Article 398 LCT).

The notion of maturity is similar to that of delinquency, but the two do not overlap completely. A debtor is delinquent if it does not fulfil an obligation by a time limit set for its fulfilment, and, in the absence of such time limit, when requested to do so by the creditor (Article 324 LCT).

The maturity of a receivable and lateness in payment create many legal consequences:

1. The statute of limitations period begins to run from the time the creditor was able to request fulfilment (Article 361[1] LCT), or from the occurrence of the time limit, or immediately after the obligation is instituted, where no time limit is contracted pursuant to the rules of Article 314 LCT cited above;

2. The debtor’s actions can be avoided only if the account receivable has matured (Article 280 LCT);

3. Maturity is the usual requirement for initiating enforced collection (cf. Article 53, Law on Enforcement and Security),[5] even though some enforced collection procedures can be launched before an account receivable becomes due: for instance, in a civil case, the court can order a defendant to perform an obligation only if such obligation has become due for performance before the close of the main hearing (Article 343, Civil Procedure Law).[6] This means that a lawsuit can be brought before a receivable matures. Nevertheless, in this case the creditor risks having their complaint rejected as premature and/or ultimately having to pay the legal costs;

4. Only a receivable that has not yet matured, meaning for which the time limit for performance is yet to occur, may be factored. The most important legal consequence of late payment for monetary obligations is that statutory default interest is owed only after the payment becomes past due (Article 277 LCT).




The economic crisis caused by the Covid-19 pandemic has deepened issues with access to finance and late payment by the MSME sector. One of the many adverse effects of Covid-19, any disturbance to a supply chain may further reduce consumption and constitutes a major threat to liquidity and risk exposure of the MSME sector. These circumstances have been making it difficult for Serbian businesses to fulfil their orders and meet their obligations, which may have a knock-on effect on local and regional supply chains. The possible recession can cause challenges in accessing bank loan finance. This could induce MSMEs to delay paying their debts in order to retain working capital. MSMEs can remain in business in the short run even when operating at a loss, but no company can survive for long without cash required to meet its current expenditures. As such, an effective system for MSMEs to collect their accounts receivable is a precondition for them to securely finance their business ventures.

Efficient management of non-performing receivables can reduce reliance on internal funds or informal sources of finance. Even though the Late Payment Law defines payment periods – and sanctions for not abiding by them – there is much evidence that the issue of late payments continues to adversely impact the operation of the Serbian MSME sector. Compared with their foreign peers, Serbian MSMEs have suffered huge losses in the past due to non-performing receivables. There are many likely reasons why MSMEs have failed to address outstanding non-performing receivables, including lack of awareness of how to manage accounts receivable, poor risk management, unequal power relationships between suppliers and buyers, inefficiency of the judiciary, absence of a culture of prompt payment, and the like.

MSMEs generally lack an appropriate receivables management process as outlined in this chapter, and this has been identified in semi-structured interviews with relevant players in the receivables market (see the Semi-Structured Interviews chapter). One reason is that MSMEs fail to recognise the benefits of this system. The size and structure of MSMEs also act as constraints to the introduction of these rather complex arrangements. MSMEs often lack human and other resources that would allow them to put into effect an efficient collection system. Even though much data is available on the BRA and NBS web sites (such as financial statements), their appropriate interpretation requires specialised financial and legal skills. One option is for an MSMEs to retain a collection agency to manage its receivables, and another is to introduce specialised software tools, such as Bisnode solutions, into the company’s internal receivables management process; combinations of these two approaches are also possible. The advantages of using this software include: (1) simple indicators showing debtor solvency and liquidity risk, with complete solvency reports available on demand; (2) aggregation of information from a variety of sources, such as company registration data, bank accounts, tax audits, real estate ownership, and the like; (3) ability to set predefined criteria (triggers) to allow automatic monitoring and reporting for a large number of businesses (including account freeze, removal of tax identification number, initiation of enforced collection, etc.), which also automates risk monitoring; and (4) ability to use these tools for other MSME operations, such as marketing, sales, portfolio diversification, market research, and the like.




[1] For instance, late payment of taxes, customs dues, and social contributions due to the inability to collect invoices limits access to state aid and programmes financed from structural funds.

[2] Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the European Parliament and of the Council on combating late payment in commercial transactions (recast) — Implementing the Small Business Act’, COM(2009) 126 final — 2009/0054 (COD)(2010/C 255/07), Official Journal of the European Union, C 255, 22.9.2010, 43.

[3] Law on Periods of Payment of Monetary Obligations in Commercial Transactions (Official Gazette of the Republic of Serbia, Nos. 119/2012, 68/2015, 113/2017, and 91/2019), referred to as ‘Late Payment Law’ throughout.

[4] Law of Contracts and Torts (Official Gazette of the Socialist Federal Republic of Yugoslavia, Nos. 29/78, 39/85, 45/89 – Constitutional Court of Yugoslavia Ruling, and 57/89; Official Gazette of the Federal Republic of Yugoslavia, No. 31/93; Official Gazette of Serbia and Montenegro No. 1/2003 – Constitutional Charter; and Official Gazette of the Republic of Serbia, No. 18/2020), referred to as ‘LCT’ throughout.

[5] Law on Enforcement and Security (Official Gazette of the Republic of Serbia, Nos. 106/2015, 106/2016 – Authentic Interpretation, 113/2017 – Authentic Interpretation, and 54/2019), referred to as ‘LES’ throughout.

[6] Civil Procedure Law (Official Gazette of the Republic of Serbia, Nos. 72/2011, 49/2013 – Constitutional Court Ruling, 74/2013 – Constitutional Court Ruling, 55/2014, 87/2018, and 18/20200), referred to as ‘CPC’ throughout.