Peacocks makes changes to supplier payment terms
Discount fashion chain Peacocks is increasing the maximum time it takes to pay for shipments from 90 days to 130 days in a move that they claim, actually aims to see suppliers paid faster.
In a letter written to suppliers and seen by the Sunday Times, it was revealed that suppliers would now be using finance company Tradewind which will pay their invoice in seven to 10 days for a fee of 2.25 percent per invoice. Peacocks will then pay Tradewind after 130 days.
“Our relationships with our suppliers are fundamental to the business and we always seek to provide our partners with quick and simple payment,” A spokesperson for Peacocks said in a statement.”The deal we have negotiated with Tradewind means that suppliers are guaranteed to get paid in 7 to 10 days, which is quicker than anyone else on the high street and at better rates than they could access elsewhere.”
The statement continued: “This change also enables us to better unify terms across our business as well as simplify the payment process.”
Peacocks, which currently has about 500 shops across the UK, was acquired out of administration by Philip Day for 23 million pounds in 2012. The chain is now part of the Edinburgh Woollen Mill Group.
Suppliers paying for Peacocks credit
Under late payment legislation the maximum credit terms that are allowed are 60 days. Not the 90 days they were previously paying their suppliers on. So they were already going beyond the legislation with their suppliers. Now Peacocks have found a way to get 130 days credit and make their suppliers pay for it by involving a third party finance company.
Peacocks are getting 130 days to pay off the finance company and this is being financed by the suppliers who now have to pay 2.25% to get paid in seven to ten days.
Paying 2.25% to get paid in 10 days instead of the maximum 60 days means suppliers are paying 2.25% to get paid 50 days earlier than the very last day they could legally be paid. That’s equivalent to over 16% per annum.
Suppliers already on a tight margin are going to have to find another 2.25% to fund this. If their margins are 10%, its almost a quarter of their margin.
To many suppliers this will still be worth while to get the cash into their business.
Suppliers pay this 2.25% and get paid 50 days early – but Peacocks get an additional 70 days credit, paid for by their suppliers.
Does that seem fair to you?
How CPA can help
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Why not give us a call? Even if you do not take out a membership, we may at least be able to give you some valuable advice.
James Salmon, Operations Director, 30th January 2019
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