It will pay smaller suppliers, supplying up to £100,000 worth of products a year, within 14 days. Medium-sized suppliers that are providing up to £10m worth of goods per year will have their accounts settled five days quicker than larger suppliers in their category.
Speaking at the IGD Conference earlier this month, Tesco chief executive Dave Lewis said: "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."
In most categories, the shorter payment terms will enable its suppliers to pass on to their own suppliers in turn, said Tesco, meaning that the smallest suppliers will typically be paid 34 days quicker than before. All changes will be in place by the end of June next year, it added.
Tesco launched a Supplier Helpline earlier this year, with the aim of resolving any issues raised by suppliers within 48 hours.