Early Payment Facility (EPF)
Carillion has introduced an Early Payment Facility (EPF) for suppliers in support of the Government’s Supply Chain Finance Initiative, which was announced by the Prime Minister on 23 October 2012.
Supply Chain Finance is an innovative way for large companies to help their supply chains access credit and improve cash flow. Carillion was one of a number of large companies that agreed to support this initiative.
At the time of the announcement the Prime Minister said:
“I praise the commitment made by these businesses today and the wider support they provide for their supply chains. In the current climate, viable business can struggle to get the finance they need to grow – this scheme will not only help them secure finance and support cash flow, but will help secure supply chains for some of our biggest companies and protect thousands of jobs.”
Carillion negotiates terms with its suppliers and these have ranged from payments in advance to 130 days from month end. Since late 2012, Carillion has been offering an EPF for suppliers as part of a package of measures (see below for details).
The EPF benefits all participating suppliers and has no detrimental effects on any suppliers.
Every supplier can opt for payment earlier than under their existing terms and all suppliers gain the flexibility of being able to nominate when they receive payments in respect of approved invoices. Where suppliers opt to receive payment in line with existing terms, there is no cost to them in doing so.
The majority of suppliers can receive payments earlier than they would have been entitled to do under their existing terms, again at no cost.
A large number of our suppliers are already making use of our EPF and the feedback from suppliers has been very positive. More suppliers are in the process of joining as they recognise the benefits of this facility.
Supplier satisfaction survey for Carillion EPF
To help Carillion understand how our suppliers feel about the EPF facility and to identify whether and how it could be improved, we have carried out our third survey of suppliers who have registered for the EPF.
Here are some of the comments we have received in response to our Early Payment Facility.
Tim Nicholson, Finance Director from Metrorod:
“This system is fantastic. We have almost 100% invoice settlement, quick responses to invoice queries, and relatively quick invoice query resolution.”
Gerry Marapao, Finance Director at AJ Morrisroe & Sons:
“Carillion’s Early Payment Facility has been of great benefit to us in terms of cashflow, whilst costs have been effectively zero.”
Paul O’Donnell Surveying Director and Co-owner of Farpod Ltd:
“The payment system has worked very successfully for us. We have found it to be efficient and payments have been made available in good time. The system is very flexible and gives us the opportunity to take money earlier if we need to which is a useful provision to have. “
Peter Hall from The Horbury Group, which provides a national service to the construction industry:
“Carillion’s new Early Payment Facility programme is a useful payment option and something we are more than happy to sign up to. It gives us a guarantee that we will be paid at a certain time, which means we can plan and forecast, but it also offers additional flexibility so that we can receive payment earlier if we want to. This is a particularly helpful facility to have.”
Gary Smith, Group Finance Director from MGL Group:
“Both MGL Demolition Ltd and Rainton Construction Ltd work closely with Carillion and we are happy to participate in and support the Early Payment Facility. We are undoubtedly seeing benefits with the new system in terms of accessing money owed in a timely and convenient way. It is easy to use and a definite improvement on previous arrangements.”
Simon Martin, Group Business Development Director from MGL Group:
“Payment terms and cash flow are obviously important for any business, so an initiative like Carillion’s Early Payment Facility that makes it easier to work with key clients and introduces greater flexibility is something we support fully.”
Dave Swallow, Managing Director and Owner of DJ Swallow Construction:
“We are very happy with the way the system is working. The introduction of reverse factoring has made it easier for us to do more work with Carillion. It gives us the ability to use the system to suit us as we can draw down cash straight away if we need to.”
How does our Early Payment Facility work?
1. Under the EPF programme, all suppliers have the flexibility to nominate when they receive payments in respect of approved invoices. The EPF means that no supplier receives payments any later than under their existing contractual terms and many suppliers can receive payments in advance of their current terms, at no cost to themselves.
2. Carillion EPF is backed by a number of partner banks including RBS, Lloyds and Santander. Once an invoice has been approved by Carillion, the supplier has the option to log on to the EPF online platform (provided by the partner banks) and select early payment subject to a small optional bank fee. The fees charged are at exceptionally low rates of interest – typically far lower than the rates normally accessible to SME suppliers and via traditional financing options (overdrafts, invoice factoring, etc).
3. Suppliers also continue to receive payments in line with any contractual terms that Carillion has agreed with its customers, such as those specified by Government Departments.
4. Carillion is offering this package of measures in support of the Government’s Supply Chain Finance Initiative, helping businesses, particularly SMEs, to improve their cashflow and reduce their borrowing requirements at a time when many of these businesses are unable to borrow from banks or unable to borrow at low rates of interest.
We hope that this helps to explain the benefits of Carillion’s Early Payment Facility, but if you would like further information or have any questions, please contact us.