Tesco has unveiled new supplier payments terms, which it says will create a “fairer” and more standardised system.

The changes, expected to be in place by June next year, will mean the grocer’s smallest suppliers will be paid within 14 days, on average 34 days quicker than at present.

Tesco said smaller suppliers, that each deliver up to £100,000 worth of products a year, will be paid within two weeks. Medium-sized suppliers that deliver up to £10m in product value per year will have their accounts settled five days quicker than larger suppliers.

A suppliers’ survey in June rated Tesco as the worst of the big four grocers in complying with the industry code of practice that ensures fair treatment of manufacturers and farmers.

More transparent system

Chief executive Dave Lewis told the IGD conference today: “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.

“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.”

At present the grocer has 96 combinations of trading terms for suppliers, but they are being cut to five.

Lewis said: “There’s no cash gain for Tesco, it will cost us to facilitate this.”