Suppliers strike back as big boys stick boot in
Richard Edwards
2 Comments
Today Procurement Leaders reported that some of the UK’s largest companies were set to sting their suppliers by announcing extended payment terms.
The plans - another unwelcome by-product of the credit crunch - are another indication that cash is fast becoming king and appears to represent a hammer blow to suppliers that are already feeling the pinch.
The little guy, however, doesn’t appear to be taking the news lying down, as Alliance Boots has found to its cost.
Last year, the chemist chain wrote to suppliers telling them that invoices would be paid up to 75 days from the end of the invoice month – a dramatic increase on the previous, somewhat more reasonable, timescale of 30 days.
The company also announced plans to charge a 2.5 per cent “settlement fee” – effectively a charge for paying the bill, whilst claiming that its procurement strategies were “in line with other groups of similar size and scale.”
The Federation of Small Businesses (FSB) claimed that the company’s new policy, in reality, extended payment terms to 105 days, and have prompted one supplier to take action.
"Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous," the FSB said, and training business MTa International appears to agree.
The company, which unlike the corporate giant it’s taking on has just two employees, has threatened to withdraw its services unless Alliance Boots re-thinks its policy, which last week it did.
But whilst MTa celebrate other suppliers are still facing up to a stark, and rather unpleasant reality - the big boys, meanwhile, appear intent on sticking the boot in.
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Reader Comments (2)
Very harsh words on companies trying to sting their suppliers by announcing extended payment terms.
In reality, lots of retailers / customers, call their vendors/suppliers as business partners - our suppliers are also a part of our extended organization. Suppliers feel very proud on this. But when there is a financial crunch in my organization, my sales are hit, my employee's losing jobs.... my partners or my extended community should also be a part of this. So change in the payment terms is very understandable. But to what extend?
Couple of thoughts: why cannot i implement a tiered payment term? PO to suppliers would say, net 105 days or 2% discount - 70 days or 5% - 45 days. Now if my supplier is in real need of cash to run his business, he should be allowed to choose an option from the above example in his invoice and the buying organization should respect that. This is one way of managing this crisis. I feel the steps taken by these biggies, so called outrageous, will soon be relooked into.
charge a 2.5 per cent “settlement fee” - with so much automation in AP cycle, inclusion of LOP (lights of in Procurement, enhanced supplier enablement etc charging 2.5% is probably not a good practice. I am surprised to see organization still doing this...