Affected By Long Payment Terms?

06/01/2020
Affected By Long Payment Terms?

For food and drinks manufacturers, there is nothing more exciting than landing your first big deal with one of the leading supermarkets. However, problems can quickly arise from securing large orders with big brands, especially when it comes to Cashflow.

Big orders, low Cashflow

As you begin to ramp up production and grow your business, you need a healthy Cashflow. The problem is that your bigger clients probably have the longest payment terms. This means it becomes hard to fulfil your contractual obligations for the client, as you may not have the Cashflow you need, in advance of clients paying their invoices.

The longer the payment terms, the more likely it is for businesses to run into Cashflow difficulties. Without clients paying their invoices quickly, it can be hard to keep investing and growing the business. So, while food and drinks manufacturers are hoping the first supermarket order will lead on the next, without a Cashflow plan, it can become almost impossible.

The supermarket problem

According to research by The Grocer, the big four supermarkets in the UK take 45 days, on average, to pay their invoices. When many other clients settle invoices with 30 days or less, 45 days can mean a significant impact on Cashflow, especially when it comes to keeping your own suppliers happy and paid on time.

One supermarket typically offers 45-day payment terms for their suppliers. However, they have introduced quicker payment terms for their SME suppliers (where orders are less than £10,000 per annum). For applicable cases, suppliers are able to benefit from 7-day payment terms. However, for most suppliers, 45 day payment terms still stand.

Managing supermarkets’ long payment terms

At Global Asset Finance Limited with our partners, we have been there to help many of our clients who are looking to improve their Cashflow while managing long payment terms.

Businesses are often in a similar position of waiting to be paid and afraid to ask for payment even when due. We offer our Selective Invoice Finance. This means companies are able to release the cash tied up in outstanding invoices upon validation, without waiting for long payment terms and therefore, funding the larger companies using cash which is due to the supplier.

Invoice finance allows working capital and continues allowing your business to grow across multiple retailers and manufacturing industries and allowing your business to invest in new market sectors without holding your company back.

Cashflow means stronger business growth and increased sales, which Invoice Finance, Invoice Factoring and Invoice Discounting allows your company go from strength to strength.

 

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Categories: Invoice Finance Services