ASDA imposes new 90-day supplier terms despite tough new laws

08/03/2017

As tough new payment reporting laws approach, it may come as a surprise that Britain’s third largest supermarket chain plans to impose harsher payment terms on its clothing import suppliers, who according to reports will now be waiting up to 90 days for payment.

These new laws will require the UK’s largest companies to publish how long it takes them to pay their suppliers twice a year from April, in the hope this transparency will encourage big firms to improve their payment terms and policies. Here, though, ASDA’s firm move in the other direction perhaps signifies their confidence that suppliers will accept the changes instead of losing out on contracts.

This follows news that large firms are exploiting their smaller suppliers, as reported in November of 2016. With ASDA already tallying a considerable number of CCJs, after failing to pay invoices on time according to the Ormsby Street research, this announcement of increased payment terms will come as a blow to their suppliers.

In a letter sent by ASDA’s chief financing officer and merchandising officer, it is written: “We have recently undergone a further review of our payment terms and, having considered the situation carefully, we have now made the decision to extend terms to 90 days.”

They added “As such, from 28th May 2017, all payment terms for import suppliers will move to 90 days”.

This revelation follows a downturn in ASDA’s sales figures, having posted its 10th consecutive quarter of negative sales growth, due to intense competition from other discount food and clothes outlets such as LIDL and Primark and the detrimental effects of Brexit, particularly for its George business.

This delay in payment to suppliers could be a signal ASDA is searching for extra breathing space, as lengthening terms is a common stalling tactic for firms to benefit from the extra cash in their business, sadly at the expense of their suppliers.

Response to the new trading conditions has prompted one supplier to tell The Guardian: “Asda already drives a hard bargain on price, so this is all the more irritating in what are difficult trading conditions. We will have to wait another 30 days to pay our suppliers and staff. If someone delays paying us how are we supposed to pay our bills?”

So-called ‘supply chain bullying’ is no stranger to small businesses, with one in five business affected directly because larger firms frequently exceed payment terms.

Federation of Small Businesses chairman Mike Cherry has said: “Poor payment practices by big firms are responsible for killing off thousands of smaller businesses a year and threatening the existence of many others.

“This yet again highlights the need for a crackdown on late payments, which I hope will be top of the list for the government’s new small business commissioner.”

ASDA has responded with: “We work hard to build strong relationships with our suppliers and continue to offer a number of different finance and support options that allow them to access funding earlier if they require it.”

Just how much of this statement will hold fast, only time will tell. Brexit has, it seems, already made its mark as we prepare to gather up our ties from Europe over the next two years.

What do you think of ASDA’s extended payment terms? Will they affect small businesses? Let us know in the comments section below.