Initially used by Balfour Beatty鈥檚 UK construction business, the scheme will be rolled out on a phased basis across the UK. The aim is to offer support to the small and medium sized businesses that supply Balfour Beatty and help alleviate their cash flow issues by providing access to low cost funding. Supply chain partners will be able to access funds as soon as invoices are approved, within their existing payment terms.
An online portal, similar to internet banking, gives the supply chain early visibility of payment status and therefore the ability to better manage cash flow.
Following it hammering in the trade and national press last year over its treatment of suppliers, Britain鈥檚 biggest builder has sought to repair its image. One subcontractor got so fed up with Balfour Beatty鈥檚 persistent inability to pay its bills on time that he refused ot do any more work for them, despite it costing him 拢5m of his 拢12m annual turnover.
Since March this year, Balfour Beatty has been carrying out a pilot of its new scheme with a number of subcontractors. Following their feedback, the functionality of the portal has been improved to ensure it meets the wider supply chain鈥檚 needs.
Jim Galvin, director of One Four Four Ductwork, based in Liverpool, who took part in the pilot scheme, said: 鈥淔or a medium sized business like ourselves, this facility is providing us with valuable and much needed access to funds which has given us the ability to release payments to our own supply chain further down the line quicker than anticipated.
鈥淭he system itself is easy to use and monitor and is extremely attractive to businesses like ours. I would not hesitate in recommending the system to other members of Balfour Beatty鈥檚 supply chain鈥�.
Balfour Beatty has arranged the facility in partnership with two UK banks, and has also made what it says is 鈥渁 significant investment鈥� in the IT system to facilitate the scheme.
Suppliers who sign up to the scheme will be able to access payments as soon as Balfour Beatty approves their invoice. Once the invoice is approved, it is then automatically uploaded on to the bank鈥檚 internet platform. The supplier can then log in and access their fast track payment 鈥� less an interest charge per payment. (For a typical 拢100,000 invoice, for example, a supplier on 31 day payment terms would be able to receive a fast-track payment 14 days early for an interest payment of 拢127.)
The interest generated will be used to cover the scheme鈥檚 costs and will not generate net income for Balfour Beatty, the company said
Martin Chown, procurement director of Balfour Beatty Construction Services UK, said: 鈥淏alfour Beatty reinvests two thirds of its revenue in the supply chain and as such our own performance is underpinned by theirs.聽 It is essential that we develop lasting, collaborative relationships with our supply chain and it is also the right thing to do.
鈥淭he scheme is 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 our partners, specifically the small and medium sized businesses we work with, ensuring they continue to prosper and grow alongside us.鈥�
Nicholas Pollard, chief executive of Balfour Beatty Construction Services UK said: 鈥淚t is really important to Balfour Beatty that we take the supply chain with us and build even stronger relationships as we move forward with creative approaches to our customers鈥� opportunities.鈥�
Balfour Beatty said that the finance scheme is being rolled out on a phased basis and will be open to all of its UK suppliers within the next 12 months. There is the potential to introduce the scheme to European suppliers and subcontractors who trade in sterling.
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