CFOs want to extend payment terms

5 January 2012

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5 January 2012 | Helen Gilbert

Suppliers should expect to be hit by extended payment terms as companies continue to struggle with the gloomy economy in 2012.

Nearly half (45 per cent) of UK finance chiefs expect to extend payment terms to their vendors now, compared with 12 months ago, research commissioned by B2B e-commerce provider Basware revealed.

The 2011 Cost of Control Fuzzy Finance report, which compiled the opinions and priorities of more than 550 CFOs and finance directors across the world, also found that more than a quarter (28 per cent) expect to increase the supplier base to create competition.

The findings come as a separate analysis by The Daily Telegraph this week showed that some retailers are taking longer to pay suppliers. Of the 26 firms listed, 15 saw payment terms deteriorate according to their latest annual reports, against nine that saw an improvement. Two were unchanged.

Phil McCabe, senior policy adviser at the Forum of Private Business said: “Large companies expect to pay later in response to expected tough economic times. While it’s understandable that businesses of all kinds are looking to control costs in the tough economic climate it’s just unacceptable to create artificial lines of credit.

“It’s damaging to smaller suppliers and the prospects of the economy as a whole. There’s a domino effect if large companies at the top of the supply chain don’t pay on time. That can be devastating for smaller businesses and the economy. If you indulge in that practice [and suppliers go bust] there will be less to choose from and that’s bad for consumers as well.”

The Basware research also showed that less than half (44 per cent) of UK finance heads are confident that there is a ready understanding of cash flow and invoicing status within the organisation, and only 42 per cent are positive about the visibility of cash within their own company.

“This lack of visibility into cash flow and financial obligations is undermining business confidence and is likely to cause the implementation of panic-stricken financial and procurement strategies,” warned Andrew Jesse, VP at Basware UK.


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