I wrote back in October 2008 about larger companies bullying small businesses with ridiculous payment terms and contracts. Well it seems the practice is alive and well with the likes of Marks & Spencer recently announcing that they were changing their payment terms from 60-days with their suppliers to 75-days.
I find this somewhat ironic considering they are signed up to Government’s Prompt Payment Code which states among other things ‘without changing practice on length of payment for smaller companies on unreasonable ground’. For me paying 15-days later is purely about improving their cash position rather than improving the business in any way. The only business it hurts is their small supplier who has still had to pay to keep the lights on and all their associated costs in producing and supplying the product to them.
This kind of mentality surely doesn’t have a place in our modern economy? If you rely on this supplier and value the product or service they are delivering you with, then surely you should treat them as such? I am always intrigued as businesses get larger how they look to squeeze their supply chain to deliver better payment terms rather than issues within their own business to drive more sales.
From my own experience apart from the kudos of supplying someone that everyone knows the appeal ends there. They are poor payers, focus highly on cost rather than value and sap a huge amount of resource from your business. Usually they are poorly run and so your agile business finds itself bending backwards to ensure the service is experienced correctly by compensating for their inadequacies.
Much better in my mind to concentrate instead on the mid-market clients and smaller businesses that value relationships and help to drive better business. Maybe in response to Marks & Spencer’s action their suppliers should be voting with their feet and helping to supply their smaller competition with their products?