Alliance Boots - don't hold your breath for payment

The drug store/wholesaling company, which has 3,000 retail stores across the UK, has been added to the Forum of Private Businesses' Hall of Shame after it wrote to inform suppliers that it is to extend its payment terms to ‘75 days from the end of an invoice', from 1 April, 2008.

Effectively, if an invoice is issued on the first day of a 31-day month, it could be up to 105 days before it is paid. The company is also introducing a settlement charge of 2.5%.

The FPB's Chief Executive, Phil Orford, believes that many smaller firms are paying for the privilege of supplying large customers such as Alliance Boots Ltd. "The practice of large retailers – in particular – abusing their buying power continues to have a very negative impact on smaller businesses. Many of our members have registered their disapproval with us," he said. In 2007, Alliance Boots was bought out by Kohlberg Kravis Roberts, a private equity firm. It was later reported that the banks which form part of the debt syndication struggled to find buyers for the debt. The company is now owned by AB Acquisitions Ltd.

Its Integration Finance Director Colin Stuart told suppliers by letter that the company was ‘working to develop a platform for growth' with them, insisting that the move was part of the ‘ongoing integration of our retail business under a single brand and the continued development and expansion of our wholesale business'.

The letter continued: "As part of the review we have been conducting since the new group was formed, we have evaluated the terms and conditions under which we conduct business. "Based on that review, we have decided to standardise UK payment terms for invoices, for goods and services purchased from suppliers, dated on or after Tuesday, 1 April 2008.

These terms will provide for payment 75 days from the end of the month of invoice, and will further provide for the application of a settlement discount of the invoice value before VAT." One Alliance Boots supplier was outraged by the news, and believes that many smaller firms could struggle to cope with the new conditions. "This could effectively mean we will be paid up to 105 days from the date of an invoice, as well as their taking 2.5% for the privilege," said the FPB member, who did not want to be identified. "We are the supplier – we should be the ones setting the terms, not them!"

Source