Weigh up your financing options …..

if you want to avoid the sort of Christmas present Debenhams has in store for its suppliers.

Bah humbug to the prompt payment code; the season of goodwill doesn’t necessarily apply to settlement terms.

No matter how well wrapped it might be, the letter hitting the in-trays of Debenhams suppliers this side of Christmas will be as welcome as that polyester tie from an old Aunt. And just like that tie it’s probably very similar to one received a couple of years back.

Yes indeed, back in the news again is a story of a big hitter putting the squeeze on its smaller suppliers. This time round it’s the department store Debenhams that, in a letter seen by the Sunday Telegraph, is demanding discounts just for bringing payment terms “closer in line with the industry standard.”

A festive stuffing

The window for these payment enhancements is a fixed period between November 24 this year and May 26 next year. So convenient is it for the high volume of Christmas stock already in place, and the subsequent delivery of “Sale” items, one could say it is a window very well dressed.

The letter would also appear to be well dressed in PR spin, hinting that taking a bath of between 1% and 2% on the original agreed invoice value is a fair exchange for “the working capital benefits associated with early payment.”

Just whose working capital will benefit the most is open to debate but it does underline the great difficulties smaller businesses face when dealing with the high street heavyweights. Having to choose between waiting an age to get paid and shaving even more off the bottom line is hardly conducive to good cashflow management. On top of that of course is the concern about maintaining the relationship with an important customer when payment terms are the hot topic.

A sack full of solutions

Those businesses that have an invoice finance facility in place will already know how good it feels to obtain early payment without having to make concessions on price. They will also know that the word early in this case means just that; cash in the bank within 24 hours of raising the invoice and not merely a paltry reduction from 90 to 60 days.

Christmas can be a tough time for business cashflow anyway even without last minute pressure to cut prices. Luckily the invoice finance industry has evolved over the years and can now offer quick one off solutions such as single invoice finance as well as the more traditional funding of the whole sales ledger.

This mixture of products allows for well planned cashflow management or can provide the answer to a sudden and unexpected blip. Whatever the circumstances, they all offer real early payment without the need to agree to discounts.

It’s clear that at this time of the year someone has got to pay for Black Friday, especially now that it has become Black Friday Week in most cases. Just make sure it isn’t you.


by Steve Leeves

Finance Professional