As more and more companies struggle
with their cash-flow issues, they are revisiting their payment terms with their
suppliers.
A case in point is the recent review
by Marks and Spencer which resulted in them imposing extended payment terms
from Freight-on-board
(FOB) suppliers who have seen their payment terms extended from 60 days to 75
days, while full-service-vendors (FSV), who transport, store and deliver goods
for M&S, saw their payment delayed from five weeks to seven weeks.
The changes, aimed to boost Marks & Spencer's cash flow, further angered suppliers. M&S's major suppliers were upset in October 2011 when the firm asked them to make a one-off contribution of 1.25% of their annual turnover with the retailer to its store revamp programme and associated advertising.
The changes, aimed to boost Marks & Spencer's cash flow, further angered suppliers. M&S's major suppliers were upset in October 2011 when the firm asked them to make a one-off contribution of 1.25% of their annual turnover with the retailer to its store revamp programme and associated advertising.
In reality the suppliers have little alternative – if you want
to keep trading then you have to accept the “realpolitik”.
The key is to make the most of
available cash resources which inevitably leads to some hard commercial
decisions. Late payers are a luxury that no company can afford in this climate.
Stock must be turned into cash as quickly and efficiently as possible.
Those who either will not or cannot
adapt to the demands of today’s business will go the way of the dodo.
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