Survey shows most Fonterra farmers plan to use capital return for debt reduction
A large slice of the $3.2 billion proposed capital return for Fonterra farmer shareholders could end up with the banks.
It will see all the New Zealand suppliers with which it spends up to $300,000 (each) annually being paid on the 20th of the month following the month of invoice, the chief financial officer, Marc Rivers, told Dairy News.
“I don’t think it is something that’s been talked about much, but our teams have been quietly working with our smaller vendors on a one-on-one basis to move them to shorter payment terms,” he says.
“We process over a million invoices each year. By working with our vendors to find terms that work for them, clarifying the invoicing process and ensuring their invoices include the right details, the co-op has been able to progressively shift 79% of our vendors onto what we call ‘31 day’ payment terms or shorter.
“We are now taking this a step further and, following a significant upgrade to our financial systems, from August 1, 2018 will be introducing the new standard payment term for our smaller vendors.
“As a co-op made up of farming businesses we recognise the enormous contribution that small businesses make to NZ and its economy.
“Our new standard payment term demonstrates our commitment to small businesses and recognises that our success in taking NZ products to the world relies on the success of many businesses throughout the country.”
Rural Contractors NZ has welcomed Fonterra’s move to make payments the month after invoicing.
RCNZ’s chief executive Roger Parton says his organisation was among those calling for this change and is pleased to see Fonterra responding positively.
“This will have a good beneficial flow-on effect not just for rural contractors and those they employ but in rural communities around NZ.
Minister for Small Business Stuart Nash has congratulated Fonterra for its change of policy on payment terms for small and medium suppliers.
“I expressed concerns earlier this year about the tough payment terms faced by some small and medium businesses, after reports that some were waiting up to three months for payment. I also raised this directly with Fonterra.”
Nash says it will affect at least 4000 suppliers.
“I do not generally seek to single out individual businesses but this positive change by Fonterra deserves to be acknowledged. I hope it serves as an incentive for other large organisations.”
