Supply chain 23 March 2017

How payment practice reporting will give small suppliers tools to strike better deals

What should small suppliers do?

There are some simple steps suppliers can take once the information is available to make sure they are being treated fairly by new and existing customers. Suppliers should:

(1) Identify customers affected by the regulations

Most customers will be happy to provide information on their balance sheet, turnover and staff numbers. However, if a supplier is reticent to ask for this sort of information, all of the data can be found in the customer’s most recently published accounting records – which should be available at Companies House.

(2) Identify customer’s financial year end

This will let suppliers know when the customer’s payment information will become available. Firms that meet the criteria must publish a report within 30 days of the end of the first six months of their financial year and the second must be published within 30 days of their financial year end.

(3) Focus on business-critical customers.

Suppliers should forecast how much revenue they will generate from their most important business relationships and when they expect to receive it. This can then be cross referenced against the information the customer has published. If the customer has published information demonstrating poor payment practices, forecasts can be adjusted and the supplier can decide if its commercially viable to change the nature of the relationship.

(4) Thoroughly examine customer payment performance

If they are unhappy with the information published, suppliers can ask to discuss it with their customer contact. Payment transparency gives suppliers more clout around the negotiating table.

(5) Prepare for late payments

Building up a picture of which customers have had historic issues with late payments will help suppliers to establish where they may be exposed to risk. This information should be used to check that cash flow can handle delays, and that the necessary procedures are in place to effectively chase payment.


 
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