Supermarket giant Tesco has the worst payment performance amongst a list of the UK’s best-known retailers, taking an average of 105 days beyond terms to pay its suppliers.
Iceland and Debenhams were the next two retailers on the list, taking an average of 75 days and 73 days beyond terms respectively to pay their suppliers.
Data analysis by financial technology startup Ormsby Street also found that the average time taken to pay a supplier amongst the list of 20 retailers was 45 days beyond terms.
This could mean the death of some small businesses this Christmas, warns Martin Campbell, managing director of Ormsby Street.
“Just because a retailer is a household name, it’s no guarantee they are going to pay on time, as our analysis clearly shows. If an invoice had 60 day terms, a small business would be waiting on average more than 100 days for payment – that’s clearly unacceptable – and even the best performer amongst these retailers is still not paying on terms,” he said.
“Also, because Christmas is such a major part of the shopping calendar, any orders may be much larger than at other times of the year. This means that a small business could be waiting for even more money during the festive period. If they have had to take on extra staff or resources to meet the order to a major retailer, this could be a potentially difficult and damaging time for their cash-flow.”
High-end department store Fortumn & Mason has the best reputation when it comes to paying suppliers on time, taking an average of five days beyond terms to pay its suppliers.
In second place was Lidl, which takes an average of nine days beyond terms, followed by House of Fraser and John Lewis, which pay on average after 15 and 18 days beyond terms respectively.
“Negotiating with a major retailer on things like payment upfront can be tough – retailers are all aware that for a small business it’s a big deal to get their products in front of a national audience and so they usually hold the trump card,” continued Campbell.
“But that’s not to say that small businesses should just accept the situation. If the retailer values the product and wants it in their store, there should always be a little leeway for negotiating better payment terms.”