Extending the time taken to pay suppliers can save money, say procurement advisers Efficio, but any such moves must be implemented carefully.
In its latest Viewpoint report, Time to Pay: Extending Payment Terms to Free Up Capital, Efficio says this is currently a hot topic but that there are often fears that it could adversely affect suppliers.
How quickly customers pay their bills can make a big difference to suppliers’ chances of surviving and prospering, Efficio says. Its recent grassroots survey among procurement professionals revealed fears that extending payment terms could push vulnerable suppliers into insolvency.
Efficio Vice President James Jenkinson writes: “Procurement professionals wanting to extend payment terms may come up against resistance from others in the business who may fear that it will go down badly with suppliers.
“They may also suspect that it will simply lead to suppliers building the extra cost into their pricing structures, thus passing the burden back to the buyer. Such fears among non-procurement colleagues were raised in the recent Efficio survey.
“Experience, however, suggests such fears are largely unfounded. If handled correctly, and only for categories that are not finance-based, it is possible to extend payment terms without incurring additional costs.”
Jenkinson adds: “It is also vital to manage relations with the suppliers affected and keep them on side. In some cases there may be a risk of damaging relationships with valued suppliers and, handled badly, it could lead to losing important suppliers for the sake of relatively small cash benefits.”
Notes to editors:
Time to Pay: Extending Payment Terms to Free Up Capital can be downloaded from: http://www.efficioconsulting.com/_uploads/documents/view-poi...
Procurement in Action - The Efficio Grassroots Procurement Survey 2011 can be downloaded from:
Efficio is a results-focused procurement consultancy, with a track record of helping leading organisations achieve more value from their procurement. Comprised of experienced professionals with a blue-chip consultancy heritage, Efficio combines the credentials of a top tier firm with the depth of expertise of a flexible niche player. Clients include 3i, AstraZeneca, Barclays, BAT, Biffa, Deutsche Post, Ford, Goldman Sachs, HBOS, KKR, Nokia, National Grid, O2, Philips and Thames Water.
For more information please contact:
Georgina Golding, Marketing Manager, Efficio, on:
+44 (0)20 7553 6938
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