The impact of payment terms
Roughly a 1 minute read
The third of our Covid-19 supplier commitments is to shorten our payment terms to Net Cash Against Documents (NCAD) to speed the flow of money to suppliers where it’s needed. We’ll also work with our suppliers to ensure they are able to access responsible credit providers.
Decent payment terms and paying our suppliers promptly has always been important to us. We know that they not only support our suppliers’ financial planning, they also have an affect on how quickly suppliers have the cash they need to pay smallholder growers and workers.
In the current climate, maintaining cashflow has become more crucial than ever for our suppliers. That’s why we’re keen to ensure they have every avenue in place to remain resilient during the pandemic.
Our long term contracts continue to play a part in this. They can act as collateral for suppliers to get short term loans from credit providers, which means cooperatives can pay their growers on time.
We’ve also worked to further shorten some of our payment terms. Traditionally we had a maximum 35 days payment period on most of our tea contracts. However, our coffee contracts are on a ‘net cash against document’ basis – so we send payment as soon as we receive the appropriate documents. Through the pandemic we’ve offered our tea suppliers the option to change to NCAD.
In the last few months, six of our tea producers across our supply chain in India and Africa have taken up our offer. It’s helped them with liquidity at a time when global logistics is a little slower than usual, meaning their tea gets turned into cash quicker which they can reinvest in the business.
Shortening payment terms like this may seem a simple change, but it can have real impact for those who need it.
Last updated 20th August 2020