Payment terms tough for suppliers
Three out of the big four grocery retailers are signatories of the Prompt Payment Code, through which they commit to pay suppliers within 60 days. However, they also pledge to move towards paying up within 30 days.
Despite this, according to exclusive research by Swift, aside from Asda, for which payment terms are unclear, the other three weigh in at, in ascending order, an estimated 32, 46 and 50 days.
“The swelling ‘piggy-bank’ of supplier monies held by supermarkets exacerbates the risk of them making unwarranted deductions, which causes suppliers financial distress as they then struggle to pay their own employees and other bills on time,” said Swift.
‘Does not bode well for suppliers’
“This later payment trend does not bode well for Asda and Sainsbury suppliers who also face a price-squeeze in their proposed merger.”
Commenting on the research, Lisa Jack, professor of accounting at the University of Portsmouth Business School, said: “It is always difficult where one business receives a substantial amount of its income via cash, debit or credit card, not to see longer payment periods for its suppliers as an imposition.
“Whilst all companies in food and drink have to struggle to maintain cash flow, it is harder on the small to medium-sized enterprises who make up most of the industry.”
