Morrisons To Pay Smaller Suppliers Quicker

Morrisons has pledged to shorten its payment terms for its smaller suppliers to a maximum of 14 days.

From 1 April, all goods for resale suppliers, whose business with the retailer is worth up to £100,000 annually, will be paid within 14 days of receipt of a valid electronic invoice. Morrisons said the move will benefit more than 3,000 suppliers.

Morrisons is currently looking to find more 200 local suppliers as part of its ‘Nation’s Local Foodmakers’ programme.

Morrisons also announced today that to help small suppliers who currently don’t use an electronic invoicing system, it is developing a free-to-use supplier portal, through which invoices can be raised and submitted. The new service is expected to be introduced later this year.

Darren Blackhurst, Morrisons Group Commercial Director, said: “We aim to buy and sell simply and when we listened to our smaller suppliers, they told us that these payment terms would help them with their cash flow. We want our smallest suppliers to grow with us.”

The group added that suppliers who are already on payment terms that are less than 14 days, including livestock farmers, will remain on the same terms.

The moves build on the retailer’s recent drive to make itself easier and more transparent to work with. Changes introduced by Morrisons in recent months include reducing the type of supplier income from 37 to three; removing or reducing many charges that suppliers pay; resolving all cost price invoice queries within five working days; and introducing a simpler standard Supply Agreement for adoption this year.

Morrisons said it is also currently developing longer term business plans for own brand partners and strategic suppliers allowing for “more effective collaboration”.

NAM Implications:
  • Whilst every little undoubtedly helps…
  • …Think of the goodwill value of taking all suppliers down to 15 days!
  • i.e. Say (with very round figures throughout) Morrisons have Trade Creditors £1.5bn, purchases of approx. £12.5bn (25% gross Margin), means they pay in 45 days…
  • Reducing all suppliers to 15 days means financing £1bn for 30 days @ say 5%, means a cost of £4m…