Payment terms lengthen again

7 February 2007
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07 February 2007 | Paul Snell

Small suppliers are waiting up to 80 days to receive payment, according to a new study.

The survey, by Siemens Financial Services (SFS), revealed SMEs waited longer for payment in 2006, compared with 2004 when average payment times were 69 days.

Payment terms for medium and large companies, however, have remained stable over the past two years. The average payment time for medium-sized companies was 62 days, while large companies received payment slightly quicker, after an average of 47 days.

Rod Tonna-Barthet, sales director at SFS, said: "Small firms are suffering. Whereas large and medium sized companies have managed to keep stable, small firms have been subject to major increases in late payment."

"One factor will be increased competitive pressure, which has forced large and medium-sized companies to ask their small suppliers to extend payments terms."

Nick Goulding, chief executive of the Forum of Private Business, said he was disappointed by the extended payment terms for small businesses. "It is becoming increasingly common for large retailers to change payment terms for their suppliers," he said. "This is a deplorable practice, passing the inefficiencies of the retailer up the supply chain. Suppliers have no alternative but to accept the changes and the consequences to their cash flow and accounts, for fear of losing such large customers."


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