For most of us, this weekend brings some welcome relief. January is when the cost of Christmas really hits home, and it seems a long month waiting for pay day to arrive. So it was welcome news for many this week when salaries arrived to reward us for the month we’ve spent braving the chill wind to make it to work.
But how would we feel if our employers turned around and told us we wouldn’t get our money right now? Instead we’d have to wait until the end of May to be paid for the work we’ve already done. By then the daffodils would have been and gone and the summer school holidays would be just a few weeks away. After four months, most people would also be mounting up debt and wondering just how they are going to manage to pay their bills.
And that is exactly the situation facing small suppliers dealing with international drinks giant AB Inbev. The firm makes Budweiser, Boddingtons and Stella Artois and last year reported a global profit of £11.7 billion.
Despite those riches, AB Inbev has just doubled its payment period to small suppliers and it will now take up to 120 days for these firms to receive payment. The company says the terms have been mutually agreed with suppliers, but it would say that, wouldn’t it? Small businesses financially dependent on a relationship with a huge firm have no choice but to take the pain and grin and pretend to like it.
Slow payment is one of the biggest problems facing small businesses trying to grow, so how does it affect firms in this Year of Food and Drink?
I spoke to two small but well-known Scottish brands. Both had issues with late payment but said the worst problems were with other small firms.
“Our worst current payers are not the bigger businesses we deal with but two small firms who both shout loudly about how ‘ethical’ they are. We also had a restaurant customer who won awards for ethical sourcing but took nine months to pay a bill,” one supplier told me.
“It’s frustrating as it is just a lie, but also because it makes it tricky to manage cash flow.”
That is the root of the problem for small firms. Corporations such as AB Inbev alter payment terms to maximise liquidity, but for small companies faced with this, it can be hard simply to pay wages and carry on trading.
The UK business minister has branded drawn-out payment “completely unacceptable” and the Scottish Government has already introduced payment at 30 days as standard on all public contracts.
Now it’s up to the private sector to clean up its act. Every big firm was a small firm once, and in this Year of Food and Drink, companies who say they are ethical need to make sure that the way they do business actually matches that bold claim.