Debenhams has said the number of its suppliers taking up a new scheme, which offers them early payment on orders in return for a discount, has become “significant”.
The department store, which posted strong Christmas trading earlier this week, has been offering suppliers early payment to help their cashflow in return for discounted invoices as a formal scheme for the last six months, according to outgoing finance director Chris Woodhouse.
He explained that suppliers can request early payment via Debenhams’ banks, but that an interest rate is applicable which suppliers must cover with a discount off their invoices. This, however, is lower than the interest they would get charged for a cash advance from banks elsewhere.
“We all know it’s not easy for small businesses with banks pulling in their horns. We thought, ‘what can we do to help them?’ Increasingly, we’ve had a material number of suppliers take up the scheme. It’s now significant. As suppliers’ arrangements come up for renewal, we expect more will come into the scheme,” Woodhouse said.
The present scheme has grown out of an auction-style initiative introduced last May, whereby suppliers bid against one another on discounts in return for early payment.