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Small suppliers suffer as big retailers pay late

18 November 2016

Small suppliers suffer as big retailers pay lateSmall suppliers in the UK are used to waiting for payments from some of their customers; new research shows that late paying is now par for the course among the UK's major retailers.

Data analysis by Ormsby Street reveals that the average time taken to pay a supplier by big retailers is 45 days beyond terms. None of the 20 major retailers that it studied consistently pays on time.

Supermarket giant Tesco has the worst payment performance in the list, taking an average of 105 days beyond terms to pay its suppliers. Department store Debenhams was also a poor performer, taking an average of 73 days.

"Winning a contract to supply a national retailer can be a landmark moment for a small business, particularly in the lucrative Christmas shopping season," said Martin Campbell, md of Ormsby Street.

"But 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."

Previous Ormsby Street research found that the average overdue invoice to a small business was worth £6,142. With larger orders in the run-up to Christmas, small firms are feeling the pinch.

"A small business could be waiting for even more money during the festive period," said Campbell. "If they have had to take on extra staff or resources to meet the order to a major retailer, this could be a potentially difficult and damaging time for their cash flow."

The best retailer in terms of prompt payment is Fortnum & Mason, which takes an average of five days beyond terms to pay its suppliers. Lidl is in second place (paying nine days beyond terms on average), followed by House of Fraser (15 days) and John Lewis (18 days).

Small suppliers often feel the big retailers have the trump card when it comes to negotiating terms, said Campbell. "The answer lies in small businesses protecting themselves against late payment by learning more about the financial health of their customers, negotiating more favourable payment terms and then chasing hard for payment when it is overdue."

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