Contractors have become the latest to set up supply chain finance schemes designed to help the cash flow of their subbies
Balfour Beatty and Kier have become the latest main contractors to set up new payment schemes designed to help the cash flow of their suppliers.
Balfour Beatty announced the roll out of its supply chain finance scheme today, which it said would allow its suppliers to access money owed to them as soon as an invoice was approved, in return for payment of a small charge, rather than wait until its agreed payment terms.
Balfour Beatty’s announcement came as the National Specialist Contractors Council published in depth analysis of Carillion’s controversial supply chain finance system, which involves extending suppliers payment terms to 120 days.
Balfour Beatty said its scheme, which it has been piloting since March, was wholly voluntary and would operate through an online portal “much like an internet banking solution”. A Balfour Beatty spokesperson said suppliers using the scheme would remain on existing payment terms, with the average at the company currently 31 days.
The firm said that a supplier aiming to get a £100k invoice at 30 days paid in 14 days would pay just £127, a charge of just 0.13% on the cost of the invoice.
Balfour Beatty developing the system since signing up to the government’s supply chain finance initiative in October last year, when it was launched by prime minister David Cameron.
The firm said the scheme is being rolled out on a phased basis and will be open to all of Balfour Beatty’s UK suppliers within the next 12 months.The firm says that its facility will be large enough to incorporate any amount of interest from its suppliers at that point, and that it anticipated that about 10% of its 19,000 suppliers would take part.
Martin Chown, procurement director at Balfour Beatty Construction Services UK, said the scheme was voluntary and easy to sign up to. “It is just one of the initiatives that we are committed to delivering in order to better support the small and medium-sized businesses we work with,” he said.
Meanwhile, rival contractor Kier revealed it had already set up a £10m bank facility to fund a supply chain finance scheme, though no suppliers had yet taken up the scheme.
Group finance director Haydn Mursell said the firm was in discussions with suppliers over whether they would take up the scheme, which he added would also be entirely voluntary, and require no change to existing contractual terms and conditions.
“For some of our suppliers who are well capitalised this won’t make sense, but for those that are already borrowing to fund their cash flow, they might be keen.”
Kier has previously said it was considering introducing a form of reverse-factoring, but not that it had actually set the system up.
Other contractors including ISG, Galliford Try, Willmott Dixon and Wates are also considering introducing forms of reverse-factoring.