How does a major business like Coles reduce payment terms for small suppliers to 14 days?
As it happens, electronic invoicing is the key.
Coles has reduced payment terms to 14 days for businesses that supply the supermarket giant up to $1 million worth of product.
It’s a great step, and one we at MYOB applaud.
We know that cash flow headaches can stem from long payment terms, which in some circumstances can even cause small businesses to go to the wall.
In fact, MYOB research last year found that late payments were causing 35 percent of small business owners to delay paying their own expenses such as rent and electricity.
It’s such an issue that the Small Business and Family Enterprise Ombudsman is currently holding a self-initiated inquiry into the issue.
The sooner small businesses can be paid for the products and services they provide, the better, so it’s great to see a huge company such as Coles move to cut payment terms.
“We understand how important cash flow is for small suppliers and shortening payment time will help make it easier for them to run their business,” said Coles managing director John Durkan.
The move will reportedly benefit more than 1000 small businesses – but the thing that’s all making it possible is electronic invoicing.
Coles told The Pulse that electronic invoicing reduces costs for both suppliers and Coles.
At MYOB, we’re especially passionate about electronic invoicing and the benefits it offers customers.
Products such as Pay Direct Online offer small businesses the opportunity to get paid quicker, and more easily.
Meanwhile, you can issue invoices electronically from MYOB Essentials – and our technology even lets you know when your client has opened the invoice.
We recently invested $48 million to acquire PayCorp with an eye toward providing businesses even more flexibility to receive and process secure electronic payments.
A major chain such as Coles making a move like this demonstrates that invoicing electronically offers small businesses an opportunity to get paid sooner.
In announcing the payment term change, Coles quoted a Tasmanian salad dressing and dessert toppings supplier, Red Kelly, as saying that the change would be transformative.
“This will make a huge difference to us. We are currently on 60-day payment terms so this decision will help our cash flow enormously and mean we can pay our suppliers more quickly,” Red Kelly’s managing director, Leo Miller, said.
“In turn, it will help our business relationships so we get better supply and service.”
The message here is that when small businesses get paid sooner, the flow-on effect can be huge.
Electronic invoicing offers suppliers the opportunity to be paid sooner, and buyers the opportunity to pay sooner.
That’s a win-win for everybody.