Last week's Office of Fair Trading audit has placed the spotlight firmly on Sainsbury’s disorganised payment systems.
The report revealed the retailer has more than 300 different payment terms, putting it in stark contrast with its high street competitors. The OFT also said Sainsbury’s is the worst offender for late payment, paying 19 per cent of all invoices late.
The report showed it could take up to 24 days for it to pay suppliers for baby care products, and 49 days to pay packaged grocery suppliers.
A spokeswoman for the retailer admitted: “Having 300 different payment systems simply clogs up the system and makes it more difficult to pay our suppliers.”
Sainsbury’s is attempting to standardise its payment systems, but as reported in the Journal (March 4) the retailer was forced to write to its suppliers in dispute over the new terms, to inform them of the flexibility in the implementation process.
The spokeswoman said the fact Sainsbury’s has so many different terms and agreements with different suppliers has pushed it to make the decision to standardise systems. “Many different terms had developed over the years.”
Originally, the retailer was intending to switch to the new terms, which would see payment made between 20 and 45 days, by March 7. However the dispute, reported on the OFT website, led to a delay.
The spokeswoman said the proposed terms are slightly better than the industry norms and said it is still in negotiations with a handful of suppliers.
“We’re talking to fresh produce suppliers and farmers and negotiating slightly different terms, as they need paying sooner. However, it should all be completed by early April,” she said.
Asda was held up as a good example by the OFT audit. A spokesman for the retailer said: “Our average agreed payment terms are between 33 and 58 days - however on average we pay in 30.
“We do have individual payment terms agreed with each supplier, which both parties sign up to, and we treat agricultural suppliers differently -- for example, our Lamb Link initiative with Welsh Country Foods which has 4,500 members, ensures every Asda lamb producer gets paid within two working days.”
The OFT audit also revealed Tesco processes invoices in up to 10 days, with payment times of around 17 days for fresh produce.
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