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The Complex Ecosystem Of B2B Payment Delays

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The late supplier payments fight is a lofty one, particularly for smaller vendors. But it’s only one part of a bigger challenge in the often conflicting relationship between buyer and supplier — as new policies from Walmart reveal. While the retail conglomerate has expanded its early payment program for diverse vendors, the company is also reportedly reinstating policies that fine suppliers for delayed or incomplete orders, despite those suppliers’ own supply chain woes.

It’s a complex ecosystem filled with intentional payment delays, supply chain financing that allows buyers to withhold payment, and policies aimed at supporting the financial health of the supply chain — sometimes all at once. In this week’s B2B Data Digest, PYMNTS looks at the latest stats behind late payments, from the U.S. to Kenya.

3 percent fees on invoices will be charged by Walmart to suppliers that fail to fulfill 98 percent of orders on time, according to the Wall Street Journal. The policy signals a return to pre-pandemic practices of charging food vendors that deliver late or incomplete orders after retailers like Walmart and Sysco nixed those penalties at the height of the pandemic. But vendors say supply chain issues and labor shortages remain despite pandemic improvements, citing their own delivery delays that create chain reactions for their own retail customers.

45-day payment terms, typical for the apparel industry, have been stretched — and even doubled — due to pandemic supply chain disruptions and financial struggles. Reports in Bloomberg said that Gap averaged 68-day payment terms to suppliers in the quarter through October, three weeks longer than the same period a year prior. Ross took 75 days to pay vendors in the third quarter, about a month longer than a year before, reports noted. Bloomberg noted that as bankruptcies rose in 2020, suppliers were left scrambling without any guarantee of seeing their outstanding invoices ever paid.

£10 per month is the cost of Tide’s new Invoice Assistant solution, a tool rolling out later this month for small business customers of the U.K. challenger bank struggling with late payments. The invoicing solution can help businesses get paid at least four days earlier, Tide said, and automates the process of chasing down unpaid invoices.

$9,372 in fines, or five years in jail, could be the new penalties for late payments in Kenya as the country looks to tackle delayed supplier payment practices in new legislation. The Prompt Payment Bill, 2021 proposes the ability for suppliers to impose interest on unpaid invoices based on the Central Bank of Kenya’s current lending rate. More than $4 million worth of B2B payments is currently unpaid among counties, state ministries and agencies, leading to a crunch on small businesses across Kenya, Business Daily Africa reports said.

$11 million in late B2B payments has led Tata Steel to sue Sanjeev Gupta’s metal operations, Bloomberg recently reported. Gupta’s businesses have reportedly been hit with turmoil related to a slowdown in steel demand amid the pandemic, as well as the collapse of its biggest lender, Greensill Capital. Gupta’s Liberty House Group acquired Tata’s specialty steel operations in 2017, but reportedly ran into payment issues in May 2020.

$13.1 billion in goods and services were sourced by Walmart from diverse suppliers in 2020, the retail giant said in a recent announcement revealing the rollout of a new early payment program. Walmart said it is partnering with C2FO to expand early payment programs that connect vendors to working capital at competitive rates. While the initiative is aimed at strengthening the financial health of diverse suppliers, use of supply chain financing has also been called into question as a potentially unfair method that forces small suppliers to pay for getting paid. The program is also juxtaposed against more recent reports that Walmart, along with other retailers, are reinstating previous policies that fine their suppliers for delayed or incomplete shipments.

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