Skip to content

Tesco named and shamed in late payment dispute

BY Rachel | 11 April, 2014 | no comments

A small business owner has given up what should have been a lucrative deal with Tesco in protest at the supermarket group’s payment practices.

Moo Free Chocolates said that it had to threaten the world’s third largest retailer with a winding up petition — which can force a business into liquidation if it refuses to settle a debt — in order to receive payment that was more than three months overdue.

Mike Jessop, co-founder of the chocolate maker, said that his business almost went bust after Tesco took five months to settle a debt of more than £6,000. He is taking the unusual step of “naming and shaming” Tesco because he believes that late payment is having a “terrible effect” on small businesses.

Problems for the Reading-based company began late last year, when the supermarket paid only part of an outstanding bill. “We called and called and were told: ‘Don’t worry, we’ll sort it out.’ We got the feeling no one was doing anything, that they didn’t care.”

Mr Jessop said that he had to take out a personal loan to cover the outstanding sum. “It’s a paltry amount for Tesco, but for us it’s staff wages and it put our production in jeopardy.”

Tesco continued to ask for orders while the payment was outstanding, Mr Jessop said. “We withdrew the supply as soon as we realised there would be issues. We will no longer supply Tesco. People said we were mad. But big orders are useless if they cost you your company.”

The fast-growing company, which has sales of about £1 million and 18 staff, also supplies Sainsbury’s and Waitrose. Mr Jessop said that he had no problem with the companies’ payment practices.

Tesco blamed the delay on an “administrative error” and apologised to Moo Free. Eventually the bill was settled 106 days late, meaning that Moo Free had to wait about five months for payment once agreed contractual terms are taken into account.

The retailer paid £143 more than its original debt to Moo Free because Mr Jessop invoked a rarely used piece of legislation, which allows suppliers to charge interest and fees to late payers.