Dairy giant in the gun over payment time

Fonterra is extending its payment time on invoices to suppliers and contractors from 30 days to 90.

Fonterra is not doing its public image or relationships in the rural sector any favours by extending its payment time on invoices to suppliers and contractors from 30 days to 90, says rural contractor Steve Levet.

The current Rural Contractors New Zealand president says he has no direct dealings with Fonterra but has been contacted by association members from other parts of the country concerned about the implications for their businesses as well as the perception the payment extension has for the co-op.

"It sends a terrible message to farmers. That it is okay to delay paying suppliers - and that is not on," Mr Levet says.

The Wellsford contractor and bull farm owner acknowledged the dairy sector was going through a tough time but said that was no excuse for poor business practise.

"This should not be used as an excuse to not pay contractors in a fair and timely manner."

He believes most dairy farmers would not approve of Fonterra's actions and he would not like to see them take a similar stance with their own suppliers. His advice to farmers needing work or services on their farm: "If you can't afford it, don't order it - don't take others down with you.

"I can tell you rural contractors are hurting just as much as dairy farmers. The last thing we need is for people to delay paying us or trying to dictate pricing."

However, Lukas Paravicini, Fonterra's chief financial officer, says the co-op looked at its vendor terms in 2011 and found they were not international best practice, nor aligned with Fonterra's business cash cycles, including how and when its international customers paid their bills.

"Part of our 2015 business transformation was to speed up compliance to a 60 day global standard term. As result, an additional 1000 or 6.5 per cent of our NZ vendors have now been moved to this standard term."

Mr Paravicini says 75 per cent of Fonterra's New Zealand vendors have had no change to their payment terms and are still being paid on a 30 day term. "We acknowledge that the pace of change in payment terms has been a challenge for some vendors, and we are working with those vendors on the changes."