Before the InBev and Anheuser-Busch merger in 2008, Anheuser-Busch paid its vendors, like a lot of other corporations, about a month and a half after they received an invoice. But post-merger, the wait time stretched to as long as four months.
AB InBev's official statement at the time said Payment terms vary and are always set in mutual agreement. The lengthened terms went on to generate $2.4 billion in cash between 2013 and 2014.
3G Capital (the team behind the AB InBev merger) similarly bought Heinz in 2013, where payment terms jumped from 62 to 73 days. Before they bought Kraft, it paid its bills in 40-50 days, now of course the wait to be paid by Kraft Heinz is much longer.
The $2.4 billion mentioned above only required AB InBev to tie up $400 million in inventory and receivables, so by 2015, accounts payable departments worldwide were employing similar tactics, evolving from business functions into profit centers.
Banks saw what this was doing to some vendors and began to offer supply chain finance programs so that qualified vendors could get paid in a few days, minus a fee, and then the bank would wait the four months for full payment.
But it's mostly large vendors that qualify for supply chain finance, and it's mostly large vendors that can qualify for bank loans. Smaller vendors today must adapt creatively, find different customers, or close shop.
Kapwork’s mission is to help small and medium-sized businesses shrug off long payment terms by quickly and reliably turning their unpaid invoices into cash. Kapwork Verify gives you Portal Agents that automatically verify the data that funders need to purchase your invoices efficiently and at a reasonable rate.
References:
Dog days (payable) Financial Times, FT Alphaville, April 28, 2015 by Sujeet Indap
Five Reasons Why Obama’s SupplierPay Isn’t Working, Mar 17, 2016 by Ken So
The Unsustainability of Extended Payment Terms, Apr 9, 2015 by Raz Godelnik