Fonterra reverses unpopular policy
Fonterra will roll back a controversial policy that saw it wait up to 90 days to pay invoices from its thousands of trade suppliers.
The dairy giant will in August return to ‘‘an industry norm’’ of paying small businesses on the 20th of the month following the end of the month in which an invoice is received.
Small Business Minister Stuart Nash welcomed the change, which he said would mean faster payments for more than 4000 firms.
Fonterra attracted widespread condemnation in 2016 when it changed its standard payment terms to make suppliers wait until 61 days after the end of the month to be paid.
Those terms applied to the likes of tradespeople and contractors and not to farmers who supply Fonterra with milk.
The 2016 move came when milksolid price forecasts were wallowing in the doldrums at about $3.90. It was labelled ‘‘classic bully-boy tactics’’ by former National MP Chester Borrows.
Rob Spurway, Fonterra’s chief operating officer of global business, said Fonterra was revising its stance after listening to what its smaller suppliers had been saying.
‘‘This is doing the right thing. It is about providing them with that transparency and certainty.’’
Fonterra’s change of heart appears to have been sudden.
The company said as recently as January that it had no plans to review its standard terms, pointing out six months could pass between it starting to manufacture a product and it being paid itself.
Nash said then that he was disappointed by those comments, and said yesterday that he had also raised the matter directly with Fonterra.
‘‘I do not generally seek to single out individual businesses, but this positive change by Fonterra deserves to be acknowledged,’’ he said.
The new, faster payment terms will apply to suppliers that provide Fonterra with up to $300,000 of goods or services each year.
Spurway said some mediumsized suppliers would stay on the older payment terms, explaining it ‘‘had to draw the line somewhere’’, while most big suppliers are understood to have negotiated bespoke arrangements.
Even most smaller suppliers had negotiated terms of 31 days after the end of the month, or better, he said. None would be disadvantaged by the new policy, he added.
Nash said he hoped Fonterra’s decision would encourage other large organisations to ensure prompt payment of their suppliers and contractors.
Payment terms widely, he said.
‘‘The Government is looking at what support it can create for a business climate where prompt payment of invoices is the norm rather than the exception.
‘‘Timely payments are essential for good cashflow and, for small businesses, cashflow is commonly a number one concern.’’
Accounting software company MYOB also welcomed Fonterra’s announcement, saying reducing payment times for small businesses was good for the economy.
‘‘We’ve long advocated for businesses and government to sign up to a prompt payment protocol that would see small businesses paid quickly,’’ MYOB spokesperson Conor Roberts said.
MYOB’s most recent survey of small-business owners found 18 per cent felt late payments placed them under ‘‘extreme’’ or ‘‘quite a lot of’’ pressure. could vary