News reports seem to emerge on a daily basis proclaiming the urgent need to expedite payment processes in the construction industry. These reports place great emphasis on the repercussions of late payments, but lack thorough attention on how change might be implemented. Instead of dwelling on the problems, there needs to be more discussion on how we might resolve this never-ending issue.
A recent report by CN (Construction News) showed that some of the UK’s largest contractors have pledged to improve their payment practices. The report found the biggest 20 contractors take 47 days on average to pay suppliers, whilst 38% of invoices are not paid on time. The report identified that many of these organisations have improved their payments terms and have pledged to do more. In fact Balfour Beatty, the UK’s largest contractor, has openly stated that it was ‘working to speed up payments through more automation of its systems.’ (more…)
The Government released a new regulation to target late payers, whereby late paying contractors could be potentially banned or excluded from future, major projects. The new measures will target large companies operating in the public sector. But in the last few weeks it has come to light that private sector clients and developers have been advised to adopt the same measures in order to avoid late payments. What are the solutions to help prevent tardy payments from occuring?
The new measures, delivered by Cabinet Minister Oliver Dowden, outlined that companies will face punishment if they do not practise fair payment. In effect, the measures will make it easier for subcontractors to report poor payment methods to the authorities. In order to reduce the occurrence of late payments, the Government is offering advisory workshops to help companies with their project management and payment plans. Solutions such as these should help prevent any tardy payments, ensuring that employees and businesses do not suffer as a consequence. (more…)
This week it has been announced that construction giant Carillion is to go into liquidation, owing up to 30,000 businesses around £1bn in unpaid costs, as well as putting thousands of jobs at risk.
What is clear from the collapse of such a seemingly untouchable giant such as Carillion is that there is a wider review needed for the way the industry is operating under its current business model. As part of that, the traditionally long and uncertain payment terms facing many construction subcontractors needs to be reviewed.
‘With more and more businesses having taken the first key step towards automation (Application generated PDF documents), it’s time to discuss the next time-consuming, labour-intensive and error-prone element to overcome’, writes Matthew Jones at Open ECX.
The easiest and most efficient way to send documents such as invoices and orders is via email as a PDF document. Billing systems create the PDF documents and email them directly to the recipient. (more…)
The Specialist Engineering Contractors’ (SEC) Group is calling on the Government to solve the UK construction industry’s long-standing and crippling payments problem, labelling the current cashflow position as “critical”. (more…)
Last Updated by Mark Mitchell, Operations Finance Director at Osborne
Keeping on top of the paperwork generated by even the most straightforward project-based contract with a given subcontractor can prove an arduous task, with various documents coming in and going out throughout the works requiring actioning. Managing this process in a timely and efficient manner becomes increasingly difficult as the number of ongoing projects and subcontractor contracts increase, something we have first-hand experience of at Osborne.
We utilised the services of more than 1,200 different subcontractors last year – from major businesses working on our behalf on a number of projects right down to small, niche companies working on one-off projects.
As you can imagine, processing payment-related paperwork for each of these subcontractors without error or issue is no easy task. That’s why we’re working with Open ECX to build and implement a bespoke system called WebContractor to increase efficiencies.
The 2016 Farmer Review, or ‘Modernise or Die’ report, by the Construction Leadership Council provided much food for thought in terms of adapting and reorganising traditional onsite business processes in order for firms to remain viable in future. What the report doesn’t consider so explicitly however, are the numerous efficiencies to be gained by adapting processes in the back-office.
The Review suggests that ‘business as usual’ is not an option while the industry faces an uncertain post-Brexit future. Instead, rigorous thinking and planning, moving to more efficient ways of working on site, and employing the right quality and quantity of skill are important. (more…)
There is a lot of discussion in the industry relating to construction financial management and the construction payment process. Here, we try to answer some key questions…
The UK construction industry is notoriously challenged by delayed and late B2B payments. Why is this sector struggling more than others?
In the majority of industries and in everyday life, we usually pay immediately and in full for any goods and services received. In the construction industry however, projects can be lengthy and interim valuations and applications for payment are necessary to ensure that materials and labour used on the job so far are paid for. (more…)
Last Updated by Colin Darch, Business Process Consultant, Open ECX
The UK Construction Act Begins to Bite
The payment provisions in the UK Construction act have been designed to impose structure, clear timelines and defined areas of responsibility into what is one of the most contentious parts of the contractor – subcontractor relationship.
This framework, in combination with a revamped dispute resolution process designed to give both sides access to rapid adjudication, means that contractors need to develop a firm understanding of the payment process and their responsibilities within it.
Last Updated by Colin Darch, Business Process Consultant, Open ECX
Why businesses should treat the new ‘Duty to Report on Payment Practices and Performance’ legislation as more than a tick box exercise
Under new Government legislation coming into force in April 2017, large companies will soon be asked to report on their payment practices, policies and performance every six months. While compliance is mandatory, there are commercial incentives available to those businesses that treat the new Government legislation as more than just a tick-box exercise.
The new duty to report will make a whole host of large companies’ payment-related information publically available for the first time.