High street chains, including Morrisons and Marks & Spencer, have launched strong-arm schemes that deliberately set out to delay payment of SME supplier invoices.
Hard-pressed small suppliers are now being forced to wait a month longer to receive payment from these large, powerful chains. If the suppliers are unable to live with these delays, the supermarket chains are then offering them access to bank credit, on which interest is charged. This aggressive practice has left many SMEs fighting to survive, rather than thrive.
Phil Orford, chief executive of the Forum of Private Business, referred to this approach as an “ethical deficit at the heart of some of Britain’s most well-known companies”. He went on to say, “Their apparent collusion in this area threatens to break the backbone of the UK economy – small businesses.”
Roberto Moretti, chief executive officer at Oxygen Finance Limited, comments: “Extending payment terms in order to create working capital at the expense of your supply chain is a very outdated way of approaching your business. The financial value that you generate is small, especially when compared to the strain you are putting on your supply chain and particularly on those smaller suppliers who desperately need cashflow to keep their business moving forward.”
“We would encourage large buyers to spend more time to understand their supply base and work with them as ultimately these suppliers are the ones who will innovate and drive greater value for all. Paying suppliers early helps to deepen buyer-supplier relationships and ensures that the supply chain remains healthy”, he continues.
“At Oxygen, our approach is to work with buyers, understand their business drivers and then create a value-add proposition that works not only for them but also for their suppliers. This methodology ensures that everybody continues to believe in the relationship as ‘win-win’ and there is not the bad taste that has become associated with other programmes, where the underlying payment terms are extended.”