Responsible purchasing practices: a win-win for human rights and returns?
Our research explores the link between a company's financial returns and the time it takes to pay suppliers.
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“Purchasing practices” is an umbrella term that refers to how buyers engage with their suppliers. It includes principles such as planning and forecasting, cost and cost negotiation, payment and terms.
Lengthening payment terms is a common strategy that buyers use to manage cashflow, yet this can place financial stress on suppliers and ultimately lead to increased production costs.
Through our research, we have sought to understand how the time to pay may also be associated with the financial outcomes of the buying organisation.
Our high-level analysis demonstrates that companies with shorter payable days compared to their peers benefit from positive impacts across several financial metrics. In particular, these companies benefit from improved future share price performance, higher earnings growth and lower volatility.
While the association is weaker, our research also indicated that there is no obvious downside to risk or returns for companies that reduce their payable days.
Click here to read the full analysis.
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