Carillion claims over 200 firms using early payment facility

Aaron Morby 11 years ago

Carillion is looking to extend its controversial early payment system after signing up more than 200 subcontractors and suppliers.

The firm said that a survey of firms using the Early Payment Facility found nine in 10 said the reverse factoring arrangement had a positive effect on their ability to access payments promptly and at a time of their choosing.

Under Carillion’s arrangement, payment terms rise from a maximum of 65 days to 120 days with specialist contractors paid directly by a bank instead of Carillion through reverse factoring.

If specialist contractors want to be paid earlier, they have to pay a charge to the bank which is set out on a sliding scale depending on how early they wish to be paid.

The new payment arrangements were heavily criticised by subcontractor trade bodies when they were first rolled out in March and branded as another ruse to delay payment further.

But according to research published on Carillion’s website 87% of those using the system said they would recommend EPF to other suppliers.

The contractor said that more than £126m of supply chain payments have been made earlier as a result of suppliers adopting EPF and claimed 76% of invoices have been paid earlier than they would have been before to the introduction of the EPF.

The average supplier payment period under the arrangement has been reduced by 14 days.

Gerry Marapao, Finance Director at AJ Morrisroe & Sons said: “Carillion’s Early Payment Facility has been of great benefit to us in terms of cashflow, whilst costs have been effectively zero as Carillion has reimbursed all bank charges that we have incurred.

“The finance charged at 1.65% above base for early payment is also very competitive”

Gary Smith, Group Finance Director from MGL Group said:”Both MGL Demolition and Rainton Construction work closely with Carillion.

“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.”

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