'80-day payment is outrageous'
Moves to increase payment terms to 80 days by building sector supplier Siniat, formerly Lafarge Plasterboard, have been condemned by one of its contractors, which said it could wipe out profit.
Siniat has written to suppliers stating its intention to move to a new system, which is payment due at the end of the month of invoice date, plus 65 days.
In a letter seen by Commercialmotor.com, Siniat finance director Clive Ellwood explained that the firm had arranged with Lloyds Bank a Supplier Finance Facility, which would give hauliers “access to early payment of invoices at a very low cost”.
However, a Siniat supplier described the move as outrageous. “We are in a no-win situation. The cost of financing the extended terms is between 1.5 and 2%,” he said.
“Many suppliers will struggle to get a sufficient overdraft. To that extent, [the finance facility] will solve their cash-flow problem, but if the cost of this is an average 1.5% to 2%, the Road Haulage Association’s [RHA] figures will tell you the average margin made by the industry was 1% last year and 2% this year, so it’s wiping out the margin.”
He added: “Maybe everyone should put their rates up and if they lose business on the back of the increase, then so be it. It’s a difficult situation for everyone.”
Ellwood told Commercialmotor.com that the new system replaced a multitude of arrangements that were causing inefficiencies for Siniat and suppliers. “It’s a move towards the industry standard and it will make our payments simpler, more flexible and efficient. As ever, we will continue to talk with our partners to ensure that we continue to support them.”
Jack Semple, policy director at the RHA, said a move towards 60-day payment terms was practically the norm, but that it was creeping towards 90 days, which he described as “absolutely outrageous”.
“It’s exactly the sort of behaviour that we want to see some robust government action about. It’s a really big issue
and we are working with not just the CBI, but other trade associations to enlist their support,” Semple said.