Supermarket giant Tesco is the worst for late payments amongst a list of the UK’s best-known retailers, taking an average of 105 days beyond terms to pay its suppliers, according to new research. Iceland and Debenhams were the next two retailers on the list, taking an average of 75 days and 73 days beyond terms respectively to pay their suppliers.
The data analysis by fintech startup Ormsby Street, also reveals that the average time taken to pay a supplier amongst the list of 20 retailers was 45 days beyond terms. Previous Ormsby Street research shows that the average overdue invoice to a small business was worth £6,142, small business suppliers to some UK retailers could be waiting prohibitively long to receive late payments on a considerable amount of money.
Martin Campbell, managing director of Ormsby Street know that, whether it’s a small greetings card designer or a food manufacturer of some sort, winning a contract to supply a national retailer can be a landmark moment for a small business, particularly in the lucrative Christmas shopping season, but just because a retailer is a household name, it’s no guarantee they are going to pay on time.
He says, ‘Because Christmas is such a major part of the shopping calendar, any orders may be much larger than at other times of the year. This means that a small business could be waiting for even more money during the festive period. If they have had to take on extra staff or resources to meet the order to a major retailer, this could be a potentially difficult and damaging time for their cash-flow.’
The best retailer in the list when it comes to paying suppliers, is high-end department store, Fortnum & Mason, which takes an average of just five days beyond terms to pay its suppliers. In second place was Lidl, which takes an average of nine days beyond terms, followed by House of Fraser and John Lewis, who pay on average after 15 and 18 days beyond terms respectively.
Campbell adds, ‘Negotiating with a major retailer on things like payment upfront can be tough – retailers are all aware that for a small business it’s a big deal to get their products in front of a national audience and so they usually hold the trump card.
‘But that’s not to say that small businesses should just accept the situation. If the retailer values the product and wants it in their store, there should always be a little leeway for negotiating better payment terms.’
The analysis showed that amongst 20 of the UK’s leading retailers, seven of those took on average more than 60 days beyond terms to pay their suppliers, a period of time that is hard to justify.
Campbell concludes, ‘For a small manufacturer or supplier, winning a national retail contract can feel a little like Christmas has come early.
‘Yet if it means they have to wait more than two months to receive payment, it is a big decision as to how any shortfall in cash-flow can be bridged, if indeed it can. The answer lies in small businesses protecting themselves against late payments by learning more about the financial health of their customers, negotiating more favourable payment terms and then chasing hard for late payments.’
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