Major retailers keep small businesses waiting for payments

Small businesses are being kept waiting for payments by major retailers, according to an analysis of payment performance from Ormsby Street.

The Fintech start-up found that Tesco takes an average of 105 days beyond terms to pay suppliers while Iceland and Debenhams take 75 and 73 days beyond terms respectively.

Of the 20 retailers in the analysis, the average delay in payment was 45 days beyond terms while past research from Ormsby Street revealed overdue invoices to small businesses total an average of £6,142.

They state that many small businesses are left in financial difficulty as a result of late payments, with many firms being forced to wait more than 100 days for payment from the time they provide goods and services.

Ormsby Street Managing Director Martin Campbell said that deals with large retailers can often be seen as ‘landmark moments’ for small businesses, although it provides no guarantee of being paid on time.

The research also reveals that cash flow issues can be particularly prominent around the festive period as they may have to take on temporary personnel to meet demand.

Unsustainable practices could force small businesses into administration although there are alternative finance options that may aide their situation in the short term.

Continued late payments will place a great deal of pressure on a business though, so it is important to assess if any changes can be made to the business model to improve it.

Every retailer in the analysis paid beyond its agreed terms, although Fortnum and Mason and Lidl went over by an average of just five and nine days respectively.

Seven of the 20 took more than 60 days beyond their agreed terms to pay their small business suppliers.

Ormsby Street highlight the importance of agreeing payment terms upfront with new suppliers, adding that small businesses should not be held to ransom.

Firms also need to actively chase when payments are due and make efforts to learn more about their customers in order to reduce risk.

By Phil Smith

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