B2B Payments

Supplier Payment Terms Swing Wildly, From 5 To 180 Days

The impact of the coronavirus pandemic on B2B supplier payment habits has created two extremes.

On one end of the spectrum, retailers like clothing companies are drastically slashing orders and lengthening payment terms, if not canceling payments outright.

“The majority of major retailers are extending payment terms and there are widespread cancellations even of orders in progress,” said U.K. Fashion and Textile Association chairman Nigel Lugg in an interview with the Financial Times. “Terms are routinely being taken from 60 days to 120 or even 150 days … it could take out a lot of suppliers.”

The other end of the spectrum is a bit brighter. A recent report from Creditsafe says supermarkets have widely accelerated their vendor payment practices in an effort to promote the financial health of their supply chains.

Creditsafe CEO Matthew Debbage pointed to Walmart’s recent initiative for prompt supplier payments, a “trend evident in the whole industry,” he said.

“It’s amazing news not just for the suppliers but in the way it ripples through the wider community,” he added.

Below, PYMNTS rounds up the data on shifting vendor payment patterns across the spectrum, from five-day payments to terms as long as 180 days.

< 3 Days Beyond Terms is now the average time it takes supermarkets to pay supplier, according to a recent Creditsafe analysis, with researchers noting that this trend if paying vendors faster is accelerating for the grocery arena. Companies including Stop & Shop, Trader Joe’s, Winco, Publix Supermarkets and Walmart reflect the industry’s recent efforts to ensure suppliers are paid on time, with average payments made about five days beyond terms one year ago.

Five-day payment terms for Bank of Ireland vendors aim to help the FI’s supply chain manage cash flow. Business World reported that the bank typically pays its vendors within 30 days, but five-day payments will help bolster vendor finances. The initiative will last through June, according to reports, and will target the bank’s range of small business suppliers across technology, advertising and recruitment services.

Six-figure balances on invoices won’t be paid by luxury yacht firm Sunseeker, new reports from Bournemouth Echo said, with the U.K. company announcing that it will delay its supplier payments as a result of the coronavirus. One supplier told publication that the decision was a “shock” coming from an international company, which also announced it will halt boat production and will freeze vendor payments until “business as usual” returns.

Seven-day payment terms are the new normal for Australia’s BHP Petroleum, the company announced recently as the oil company moved to support its vendor base. The accelerated payment terms will last for the next six months for small and local business suppliers, the company said, RigZone reported, with the arrangement affecting more than 200 suppliers. According to BHP, it spends more than $150 million every year on supplier payments to vendors across the U.S., Canada, Mexico and Trinidad and Tobago.

45-day payment terms are now imposed for suppliers of Flight Centre, according to The Australian, which reported that the travel agency is struggling to safeguard its finances amid national and global travel restrictions. Flight Centre’s supplier payment expansion follows moves by Just Group, which is now paying its vendors in 180 days, as well as Sussan, a clothing company that has extended its payment terms to 90 days.

50 percent price cuts are in demand among Western clothing retailers from their Bangladeshi vendors, according to recent reports, with many clothing buyers also delaying payment to those suppliers. Bangladesh is the second-largest supplier of clothing to Western nations after China, and the clothing supplier arena is now calling on those corporate buyers to support the supply chain through timely payments and fair prices.

208 percent more invoices were submitted for financing on Taulia in March, the company revealed, noting that more than $4 billion worth of invoices were financed last month than the month before. The surge reflects the growing demand among suppliers for capital as they use their unpaid invoices to secure financing. Taulia surveyed nearly 20,000 vendors and found one-third say they’re submitting their invoice for early payment because of their desire to manage cash flow, while 20 percent say the motivation was payment predictability.

£20,000 transaction limits on U.K. government procurement cards should be re-negotiated, the Cabinet Office has advised, noting that government entities should work with their card issuers to raise monthly limits in order to pay more public vendors more quickly. The advisory notice is also encouraging government entities to make provisions to ensure as many staff members as possible can use p-cards to support timely supplier payments.

$580 billion in accounts receivable (AR) financing could support U.S. small and medium-sized businesses (SMBs), according to a letter recently sent to the Federal Reserve Bank by SMB alternative lending platform C2FO. The company announced its call for a new small business relief program aimed at turning AR into capital for small businesses that continue to wait to get paid by their large corporate buyers. Dubbed the Small Business Supplier Protection Plan, the proposal aims to inject SMBs with capital without requiring firms to borrow any money.

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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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