A blog by Martin Williams, external affairs spokesman of Graydon UK, focusing on business risks - from fraud to late payment. Martin has has spent the last 35 years in the credit information industry, and has been with Graydon UK, one of the top five commercial credit agencies in the UK, for the last 20. Apart from his PR duties, he teaches credit analysis to risk professionals and helps educate SMEs on the importance of maintaining a good credit rating. Martin is a Fellow of the Institute of Credit Management and is a sitting member of the Institute's Think Tank. He was also honoured by Credit Today, after being included on their Credit 100 list of people who have had the greatest impact in the credit industry during 2008, 2009 and 2010.
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03 Mar 2008
As a result of the 2006 merger between Boots and Alliance Unichem, the Integration finance board of the new group announced a few weeks ago that it will be standardising UK payment terms for invoices for any goods or services purchased after 1st April 2008. Good news for suppliers then? Nope- these new terms will be 75 days from the end of the month of invoice, and will further provide for the application of a settlement discount of 2.5% of the invoice value if settled promptly.For a supplier that has been paid in say 45 days in the past, turning over 10 million pounds in sales to Boots per annum, the additional average amount outstanding will be 1,234 million. Assuming the cost of credit from banks is 7%, then the cost of funding the additional credit will be 86, 000 GBP.
Boots says that its procurement strategies are in line with other groups of similar size and scale. True- Debenhams, Robert Dyas, Selfridges, BHS and B&Q amongst others have all arbitrarily enforced less attractive payment terms onto their trade suppliers in recent times in what now has become a bit of a stampede by giant retailers to flex their buyer muscle. Has anyone got any advice for trade suppliers in these circumstances?
Visitor comments
Presumably, if you are a valued supplier and do not have a supply contract covering this change in terms you will object and negotiate a better payment deal. The individual buyer for the product supplied will, no doubt, have a limited amount of time he can spend on the issue of payment terms when it comes to fulfilling store supply chains.
I am sure Boots (and the others) will not be advertising any exceptions done quite so publicly.
Posted by: Andrew Williams , 05 Mar 2008
We have been strong with Boots, orders have been on hold for two weeks+. We may lose the business, but with the margins boots requires and their new terms, its uncommercial to continue.
We dont want to lose the business, if we do we will re-submit our products in a few months on our terms/margins.
Posted by: John Smith , 15 May 2008
When I stumble upon a really good post I do three things:
1.Share it with all the close friends.
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After reading this article I am seriously thinking of doing all of them.
Posted by: forex , 14 Sep 2010
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