Tesco has the poorest payment performance amongst a list of the UK’s best-known retailers, taking an average of 105 days to pay its suppliers, research from fintech startup Ormsby Street has discovered.
Debenhams and Iceland have also been identified as poor performers, taking an average of 75 days and 73 days to pay suppliers. The research also found that seven of the UK’s 20 leading retailers take a “hard to justify” period of more than 60 days beyond their terms of agreement to pay their suppliers.
The research highlights that the average overdue invoice to a small business is worth £6,142, leaving suppliers waiting prohibitively long to receive payment.
Martin Campbell, MD at Ormsby Street explained: “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 during the lucrative Christmas shopping season.
“Just because a retailer is a household name, it’s no guarantee they are going to pay on time, as our analysis clearly shows. If an invoice had 60 day terms, a small business would be waiting on average more than 100 days for payment – that’s clearly unacceptable – and even the best performer amongst these retailers is still not paying on terms.”
By contrast, luxury department store Fortnum & Mason has the best track record in regards to paying its suppliers, only taking an average of five days, closely followed by Lidl which takes an average ofnine days to honour its payment contracts with suppliers.
However, these retailers are the exception and Campbell insisted that smaller suppliers should not stand idly by and accept late payments from retailers: “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 research concludes by advising small business that supply large retailers should protect themselves against late payment by learning more about the financial health of their customers, chasing late payments with more authority, and negotiating more favourable payment terms with retailers.