This week we wanted to discuss how small and medium sized business could potentially profit from Tesco’s late payment to its suppliers.
Back in October, Tesco’s CEO promised that small and medium-sized businesses that supply Tesco supermarkets will receive their payments within 14 days.
Speaking at the IGD conference last month, Tesco CEO Dave Lewis addressed the problem of late payments by committing his supermarket to a new standardisation policy. This meant its small suppliers would be paid in full within two weeks of making a delivery, with the policy coming into force in June 2016.
Lewis said of the changes: ‘‘One of the things that made Tesco great was the little things we did to help our customers. We want to work with our suppliers to get back to innovating on behalf of our customers and these changes will make it easier for us to do that. Our customers want value, great availability and new choices,”
The supermarket has recently gone through one of its toughest periods – Lewis recently announced a 55 per cent loss in profits during the first half of the financial year, and he now looks to turn Tesco’s fortunes around.
Lewis continued: ‘‘to help with this process, we’re announcing the standardisation of our payment terms. By introducing a new standardised policy across each category for our larger suppliers, and shorter payment terms for our small and medium suppliers, it will help us to deliver a fairer, more transparent and consistent approach across our supply-base,’’
This change means that smaller suppliers who deliver up to £100,000 worth of products in a year will be paid by Tesco 34 days quicker than before.
Medium-sized suppliers who deliver up to £10 million in product value per year will have their accounts settled five days quicker than larger suppliers in their category.
Late Payment Woes
We have previously reported the shocking statistic that late payments cost SMEs £10bn a year. This change in policy will come as good news to thousands of small businesses who have been plagued by late payments.
Nearly two weeks after Tesco made the announcement, the government responded to the late payments epidemic by announcing that they would appoint a new small business commissioner, whose role would be to specifically cut down on late payments.
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