BOOTS kick suppliers in the teeth?
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?