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


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.



Mark Cerrone

09/03/2017 (14:25pm)

As far as my understanding goes, the Late Payment of Commercial Debts Act only goes to 60 days. So any contract with a 90 day payment term in it would be considered void under the Unfair Terms Act 1999. Most "financial controllers" I speak to, (often hospital trusts or universities) are completely ignorant of the law, which, given they have so little to learn in this role, beggars belief.

Reg Rose

09/03/2017 (14:12pm)

We should all adopt the same approach. When shopping in ASDA, when you go through the till, hand the check out girls a note, that say's the following. In compliance with the terms by which ASDA pay their suppliers after 90 days of invoicing, I have today taken goods to the following value £.............., On or after 90 days or at a date convenient to myself, I will return to this store and pay ASDA. Name Address Signature and Date Then see what happens.

Jeremy Way

09/03/2017 (12:48pm)

Just another way for ASDA to increase their already massive profits at the expense of the poor old supplier. ASDA should pay within 30 days MAXIMUM in return for the bullying tactics they use on the supply chain. Ask a dairy farmer or any other supplier for that matter, They've got you by the balls and then they keep squeezing harder and harder, oh and by the way your products are going on sale next week as a loss leader GOD HELP YOU!!

Robert Lazare

09/03/2017 (11:43am)

it is time for the small suppliers whom Asda rely upon to fight back. They should collectively either refuse to supply the company unless they pay on a monthly basis or further charge them for late payment fees. They should do this until Asda and others get the message instead of giving the cash they withhold from the suppliers to their shareholders. Legislation should be brought in immediately so as to protect the smaller suppliers this is scandalous Asda should be made to pay. What is the point of doing business and waiting three months for your money. The fact is suppliers should find alternative markets and refuse point blank to supply. Asda will soon find it hard to get supplies and then the smaller suppliers with whom they rely upon will be treated better.

Hugh Counsell

09/03/2017 (11:28am)

The concern has to be raised why do Asda need so much time to pay their suppliers? Their business model is very simple with retail customers paying immediately. It could be that there is a fundamental problem at Asda with a weakening balance sheet.

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