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Fri November 27 2020

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Balfour Beatty introduces speedy payment scheme for suppliers

25 Sep 13 Balfour Beatty is introducing a voluntary finance scheme for its UK supply chain, which could enable them to receive payment weeks faster than before.

Initially used by Balfour Beatty’s 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’s biggest builder has sought to repair its image. One subcontractor got so fed up with Balfour Beatty’s persistent inability to pay its bills on time that he refused ot do any more work for them, despite it costing him £5m of his £12m annual turnover. (Click here for previous report.)

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’s needs.

Jim Galvin, director of One Four Four Ductwork, based in Liverpool, who took part in the pilot scheme, said: “For 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.

“The 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’s supply chain”.

Balfour Beatty has arranged the facility in partnership with two UK banks, and has also made what it says is “a significant investment” in the IT system to facilitate the scheme.

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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’s internet platform. The supplier can then log in and access their fast track payment – less an interest charge per payment. (For a typical £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 £127.)

The interest generated will be used to cover the scheme’s costs and will not generate net income for Balfour Beatty, the company said

Martin Chown, procurement director of Balfour Beatty Construction Services UK, said: “Balfour Beatty reinvests two thirds of its revenue in the supply chain and as such our own performance is underpinned by theirs.  It is essential that we develop lasting, collaborative relationships with our supply chain and it is also the right thing to do.

“The 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.”

Nicholas Pollard, chief executive of Balfour Beatty Construction Services UK said: “It 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’ opportunities.”

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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