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Will Tesco moment be a watershed in SME late payment?

Will Tesco’s decision to improve its payment terms for suppliers be a watershed moment in the SME battle against late payment?

Tesco has announced that it will shorten the payment period for suppliers selling products to the retailer worth £100,000 or less in a year to 14 days from 28 days. The change in policy will come into effect in June 2016. The timing of the decision is intriguing as it comes only a short time after the government announced reform of laws governing how invoice finance can be used by small businesses. The change in legislation will be introduced in early 2016. Tesco has faced criticism with regard to its payment terms for a number of years.

So, what is behind the move? A duty of care to small businesses? The Journal’s Pay Fair campaign? The banning of anti-invoice finance restrictions in contracts? The need for a good news story?

Even if the ban on anti-invoice finance restrictions played only a small part in the decision-making process, it will have had a greater impact in the area of late payment than countless previous initiatives and campaigns. Late payment has long been a bête noire for small businesses, whose stability is threatened and capacity for growth are hamstrung by the practice. Invoice finance offers a solution to this problem.

So, will other major retailers and big firms follow in Tesco’s footsteps? SMEs across the UK will be hoping that it isn’t another false dawn. The move is a positive one and alternative finance, including invoice finance, has its part to play in tackling late payment and providing the finance that SMEs need to thrive.

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