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Ed’s view: Payment predicaments

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The issue that has swept to the top of the pile for the UK catering equipment supply chain in this coronavirus crisis is definitely payment.

With reports of distributors asking for extensions to payment terms from their suppliers, like Nisbets’ letter, as Catering Insight reported on yesterday: what is the right approach in these unprecedented times?

Some dealers would argue that as their own operator customers are paying them late, or not at all, they are forced to ripple these actions back up the supply chain, or face wiping themselves out. While others are determined to settle their debts with suppliers and been seen as honest brokers, no matter if it’s detrimental to them.

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On the other side of the fence, Catering Insight has seen supplier letters representing two different schools of thought. Some are refusing requests for term extensions and saying they can’t let their distributor customers fall into arrears, and others are being more lenient.

There have also been logistical problems with suppliers actually being able to get into contact with distributors – with many staff furloughed and skeleton crews stretched thin, there may not even be capacity for them to make payments right now. The flipside of that coin is that you could argue dealers should have settled their accounts before they made the difficult decision to (hopefully temporarily) close.

I have sympathy for all sides here, as events have been progressing at such a speed that it has been tremendously hard to keep up. But how distributors have responded certainly draws into sharp focus their business models, and there’s no doubt that suppliers will be keeping track of these and considering very carefully who to work with once this crisis is over.

Some in the industry believe that certainly the bigger players on the dealer side should have substantial cash reserves – the rainy day fund for a crisis just such as this. While cash flow is indeed king, it may become obvious who operates on razor thin margins and who bolsters their own company foundations but may be entirely more picky about which projects they have taken on.

There is also the question of whether dealers are doing everything they can in their own businesses to cut back – where does asking for extended payment terms sit in their priority list? But everyone is struggling in this climate, no matter how secure they were, and some give or take on both sides of the aisle should surely be expected and welcomed.

As suppliers consider who they work with in future, likewise distributors will too. Dealers being shunted onto pro forma payments when they have historically always paid suppliers on time, or suppliers slapping expensive surcharges on deliveries is unlikely to engender goodwill going forward, if all parties emerge from the other side of the chaos.

These are the toughest times that many of us have had to face. The market going off a cliff was nothing that anyone could totally prepare for, but I have been heartened to hear of dealers and suppliers working together to find mutually beneficial solutions to the payment predicaments, and I hope that continues.

So whether you’re looking up or down your own supply chain, my only advice would be the biblical refrain: do unto others as you would have them do unto you.

Tags : coronavirusEditor's Viewpayment termspayments
Clare Nicholls

The author Clare Nicholls

3 Comments

  1. The likes of Nisbetts and J D Wetherspoon have a large supplier base and by deferring their
    supplier payments will have a knock on effect to the suppliers down the chain and the ones at the bottom will be the ones that come of worse.

  2. Speaking as one of the smaller (smallest??) suppliers (My speciality is in the design and project management of commercial kitchens and bar installations). I have to say I’m quite heartened by the support I’m receiving from a great number of larger distributors.. I lost a week being poorly, could have been Covid19, probably not, but who’s chancing?. I’m now catching up with design work and making my busness better and stronger for the battle to come.
    Our industry will bounce back. Companies on the edge will be considering pre-packs and the like. The big distributors will once again forget who’s paid and who owed and go where the orders are.
    There are advantages and opportunities (I’m available to act as your agent/ consultant). There are new markets (I’ve discovered two so far but I’m not telling you guy’s).
    Crack on Guy’s and stay safe, take care of your loved one’s and all will be good.
    Derek

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