B2B Payments

B2B Payment Terms In Flux Amid Market Volatility

late payments

Cash flow has never been more critical to businesses as it is right now, and both the private and public sectors are taking action to ensure B2B payments continue to flow through the supply chain.

In the U.K., recent reports in the Financial Times said the Cabinet Office has encouraged all public entities, including government departments, hospitals, councils and schools, to continue their supplier payments and coordinate with their vendor bases. These entities should pay their suppliers early, if possible, while the government has also advised suppliers to remain transparent and continue paying their own employees and subcontractors.

While the move was welcomed, Construction Products Association Economics Director Noble Francis told the publication that it is unclear how the government would enforce this, and raised concerns that the construction sector is particularly vulnerable to the consequences of late payments.

“The main problem will be, as ever in construction, whether this goes through the supply chain to the subcontractors, and the subcontractors of those subcontractors,” he said. “These are the firms that are most vulnerable at the moment and the ones most reliant on cash flow.”

Despite the initiative, the impact of the coronavirus pandemic on B2B payments flow has been inconsistent throughout the globe. This week’s B2B data digest looks at some of the other businesses that are vowing to accelerate payments to their suppliers — and others that have decided to extend payment terms to support their own cash flow needs.

14 day payment terms are in place at Absa Bank Kenya for its suppliers, Standard Media recently reported. The financial institution has reportedly vowed to pay all invoices with a balance of less than $9,600 within seven days. Meanwhile, reports noted, Kenya’s government has made similar measures to support its own supplier payment practices, establishing a special fund to fuel vendor payments.

90-day extensions on existing payment terms will squeeze Ross Stores suppliers, reports in Reuters said, adding that as the retailer lengthens supplier payment terms by three additional months, it is also canceling future orders from its vendors. One supplier, Gold Medal International, told the publication that it is seeing “pretty much 100 percent cancellation” from other retail customers including TJX Companies, Nordstrom, Macy’s and others, according to Gold Medal International President and Chief Executive Paul Rotstein.

120-day payment terms are in effect for U.K. retailer Monsoon Accessorize, Drapers Online reported, up from its previous 90-day terms. The publication said Debenham’s has also extended its vendor payment terms by 30 days, while M&Co is stretching its payment terms for all suppliers to 120 days as well. The retailers cited a reduction in sales as they each sent letters to vendors notifying of the payment changes.

1,500 small suppliers of Sainsbury’s will be paid more quickly, as other grocery chains in the U.K., including Morrisons and Tesco, similarly vow to accelerate their B2B payment cycles. Sainsbury’s vendors with less than £100,000 in annual turnover will be paid “immediately,” according to KamCity reports, while Aldi will pay its 1,000 small vendors with less than £1 million in turnover immediately as well.

$8,690 in minimum guaranteed fees won’t be paid by India hotel operator Oyo, according to one hotel owner, reports in the Economic Times of India said. As Oyo struggles to pay its hotel operators amid continued volatility and a dramatic decline in travel, reports said the company has also sent a letter to its suppliers advising of possible payment disruptions, though has not provided specifics as to which payments may be delayed, or for how long.

5.9 million businesses in the U.K. face the threat of delayed B2B payments, with 99 percent of those firms having 250 employees or fewer. That’s according to a recent letter by the Institute of Chartered Accountants in England and Wales, which publicly urged corporates to continue to pay their small suppliers on time to help support businesses through the current economic volatility.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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