Payment Terms and Challenges — The Supplier Perspective

I recently came across this article from a UK publication which does a good job showing the supplier perspective when it comes to payment terms and challenges. Of note in the article is that Alliance Boots has been forced to "to backtrack on plans to force suppliers to accept increased payment terms from 30 to 75 days and a 2.5% 'settlement discount' for paying." In terms of strategy, the piece suggests that suppliers avoid payment issues by adding "10% to an invoice and state that a discount will be given if the company pays on time, or attach late payment penalties." But I've got an easier idea. To wit, what about encouraging your customers to move to a paperless invoicing environment that cuts down on your receivables costs but also lets you determine when you get paid -- based on a negotiated discount arrangement for early payment. It's too bad that many procurement organizations look at downstream invoicing and supply chain finance capabilities as a "nice to have" option that is only pursued after implementing other initiatives. In today's tight credit markets where suppliers have a difficult time raising captal, it should be be a priority.

- Jason Busch

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