The small business community is furious at the prospect of Woolworths moving towards paying the majority of its suppliers within 60 days, despite the supermarket giant demanding its own debtors cough up cash within a 30-day period.
Woolworths has tasked an internal team with the job of reviewing suppliers still on 30-day contract terms, according to Fairfax.
The retail giant has said the move is to “simplify” its internal processes given a large number of suppliers are already on 60-day terms.
However, Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany the changes could mean some Woolworths suppliers will soon have to go an extra month without getting paid.
This kind of disruption to cashflow is highly damaging for any business, but particularly a small business, according to Strong.
“They are using small businesses as their bank,” Strong says.
“This shows their own lack of understanding of the world beyond Woolworths. These are people who need to put food on the table. And it’s putting companies at risk of closure because they can’t pay their bills, even though they’ve done the work.”
Strong says he knows firsthand how stressful it can be when invoices are not paid within a short timeframe.
To make matters worse, the COSBOA chief executive says Woolworths demands stricter deadlines from its own debtors.
“It’s extremely stressful [for small business owners] as there’s other people on your back saying ‘where’s my money?’,” Strong says.
“All of a sudden, it goes down the supply chain – but they [Woolworths] don’t seem to care. This is a real problem.”
Woolworths announced in June last year it was signing up to the Food and Grocery Code of Conduct.
The code of conduct states retailers must pay suppliers within a “reasonable” timeframe or a time previously agreed to.
A spokesperson for Woolworths told SmartCompany the supermarket has had 60-day terms for “many years”.
“Sixty-day terms are not new both at Woolworths and in the broader industry,” the spokesperson said.
“We have a number of suppliers who mainly for legacy reasons have different terms. We are always looking to simplify our arrangements so have been negotiating with some suppliers to move to our standard terms.”