B2B Payments

Amazon Suppliers Divided On How To Tackle Late Payments

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There was an incident in 2013 in which nonprofit firm MusicBrainz sent a cake — yes, the edible dessert — to Amazon’s finance department to satirically celebrate the three-year mark of an unpaid invoice.

“Dear Amazon: Congratulations on 3rd Anniversary of invoice #144!” the icing on the cake exclaimed. The story went viral and, for a brief moment, uncovered the challenges that small suppliers face when trying to get paid on time by their large, corporate buyers.

That problem is apparently still plaguing Amazon suppliers, at least in the U.K. Only this time, vendors are taking a less tongue-in-cheek — and far more direct — approach to tackling the issue.

Only weeks ago, the managing director of U.K. IT distributor Smithie UK, Steve Riordan, spoke out publicly about the plight of vendors that have yet to see full payment on invoices billed to Amazon.

“Everybody is scared [of speaking up], but I don’t care what anybody thinks anymore,” the executive said in an interview with PCR, a U.K. tech and PC outlet. “Why are these people getting away with it? In the industry, there are millions of pounds sitting on people’s balance sheets that Amazon won’t pay.”

Reports in March highlighted an internal issue at Amazon, in which a switch of systems a year prior had led to a massive spike in queries of vendors looking to get paid. Vendors told reporters that Amazon had claimed orders went undelivered or incomplete and that it could not reconcile proof-of-delivery documents with order documents.

One head of an Amazon supplier, who spoke to local outlet The Channel anonymously, said the fault lies within Amazon’s procurement, logistics and accounts payable departments. He pointed to a siloed process in which these three areas of operation could not adequately communicate with each other.

Reports late last year by Bloomberg argued that Amazon is deliberately paying suppliers on later terms to improve its cash flow, arguing that Amazon is “clearly making a choice to boost its own cash flow by making life harder for its suppliers.”

 

A Divided Front

The latest reports suggest the issue persists.

“They owe us an awful lot of money,” Riordan continued. “They’re crippling this industry. Let’s not be frightened of this anymore; we’ve got to put a stop to it somehow.”

It was a rallying cry for other suppliers facing the same issue, and it seemed to go along with efforts by MusicBrainz, as well as other vendors that spoke to The Channel (the outlet did not reveal the company names).

Two businesses, reports said, have decided to no longer do business with Amazon.

“Maybe Amazon thought it was too big to be challenged by distributors or that they could bully their way through this,” one anonymous vendor told the outlet.

“I won’t trade with them for several reasons,” one supplier told PCR regarding why the company no longer works with Amazon. “I saw the writing on the wall much earlier than some of my competitors, who have clearly been burnt. The only way to get something like this fixed is through legal action.”

Another distributor described the problem as “a global phenomenon, not just affecting the U.K. industry.”

“Amazon is an absolute monster,” the vendor stated.

According to PCR, however, vendors are split on how to tackle the problem.

Some suppliers told reporters they would be willing to join in on Riordan’s fight.

The suppliers speaking out against the problem may be the minority, however. According to PCR, some suppliers are looking to negotiate with Amazon, settling for the eCommerce conglomerate paying half of what’s owed on an invoice.

“We’re happy with Amazon; we have an infrastructure set up to deal with major retailers,” said the managing director of one vendor, VIP Computers, Rich Marsden. “There are always issues and challenges in this industry in general, but if you have the right infrastructure, you’ll have fewer problems.”

According to PCR, Amazon has reportedly agreed to pay 30 percent of what’s owed on outstanding invoices at Smithie UK. Riordan says that even a 50/50 split with Amazon on unpaid bills sets a “dangerous precedent.”

Amazon did not respond to requests for comment by PCR, the outlet noted.

“If other distributors have the money to write off what they’re owed, what does that say to the rest of the industry?” questioned Riordan. “It lets Amazon think they’ve got away with it.”

Riordan told reporters that, six months from now, Smithie UK could be owed £2 million (about $2.9 million) from Amazon. If Amazon only pays half of that, Riordan said, the company will “think they can pay off just half of what they owe again.”

“Distributors caving in to Amazon is suicide for them, and they’ve made it suicide for the rest of the industry by doing that,” he added.

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