In an article posted on the BBC website, we see a large UK supermarket chain called Morrisons making an interesting strategic decision to support its small business supply chain during the coronavirus disruption cycle. The company will simply pay these smaller businesses faster. As many customers clean the shelves of supermarkets, the need to re-stock often depends on the ability of suppliers to create and ship the goods, requiring good old cash flow to accomplish.
‘For the smallest suppliers, with an annual turnover of £100,000 or less, the normal Morrisons payment period is 14 days. For firms with a turnover between £100,000 and £1m, that period is from 30 to 60 days….All firms with a turnover of up to £1m will be paid immediately.’
As many readers know, the smaller the business, the greater the concerns around cash flow. Mercator conducts ongoing research on small business attitudes and activity, and in one survey we had the following result:
“Slightly less than one-half (46%) of the small businesses in this survey say cash flow is a concern. That said, few report having to delay or postpone purchasing because of cash flow concerns. Cash flow concerns are highest among companies with 50 to 99 employees.”
As a matter of fact, about a year back we posted here in PaymentsJournal about that very issue in the UK. In the piece we quote (from the original posted source ITProPortal):
“‘Many business owners across the United Kingdom are reporting that getting paid late is more of a concern to them than the country leaving the European Union. Late payment is the problem that just won’t go away for small and medium-sized businesses (SMBs..)’
The article mentions some steps that have been taken during the past few days in the UK by the recently appointed Chancellor of the Exchequer, Rishi Sunak, who announced a BPS 30 billion budget spending program to assist in the coronavirus effort, much designed for business support. The Small Business Administration in the U.S. also just announced an assistance program for small businesses.
It seems that Morrisons is doing the right thing, and assuming that this pandemic has a reasonable conclusion date (perhaps the end of the flu season), the policy can help in a number of ways, including a happier and stronger supply chain longer term.
In a somewhat related personal experience, as a long-standing user of online grocery delivery services in NYC, there has been a massive shift in online customers in just the past week. This is evidenced by disappearing delivery time slots days in advance, missing items in the selection menu, and delays as drivers navigate through the maze of street activities with overloaded trucks. Support that supply chain.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group