| Good morning. Large U.S. companies took less time to pay their suppliers last year as many of them hit a ceiling on the extension of supplier payment terms amid supply-chain constraints.
The companies took 57 days to make the payments in 2022, down 8% from the previous year, according to a new report from Hackett Group. The strategic consulting firm gathered the data from corporate disclosures for the 1,000 biggest U.S.-based nonfinancial companies by revenue.
The drop marks a shift back toward prepandemic levels, when the number of days averaged 56 from 2016 to 2019. Companies will likely continue taking less time to pay suppliers in 2023, potentially by 2 to 3 percentage points less, as supply constraints linger but appear less severe than in 2022, said Shawn Townsend, a Hackett Group director.
“There is a shift in leverage from buyers to sellers in negotiating terms,” accelerated by supply-chain bottlenecks, Townsend said.
A key method by which companies postpone their payment dates is supply-chain finance. While these programs are widespread among manufacturers, many firms have reached their limit in their use of them and other tools to extend payment terms and improve their balance sheet amid economic uncertainty and inflation, Townsend said. Companies’ existing supply-chain finance programs have remained stable, but fewer new companies are adopting them, he added. |
Operations and Supply Chain Management 