06th March 2014
Improving cash collection: how better information can help
Does your business struggle at the end of each month because you’re owed too many late payments? Here’s what you can do to help improve your cashflow.
Unfortunately, late payment is still a major issue in the construction industry, and it would seem that despite the government’s efforts the problem is only worsening. For years, construction industry subcontractors and suppliers have struggled due to lack of control over their cashflow, and large-scale, late paying firms are a contributing factor to the number of insolvencies in the industry. While some companies are experimenting with early payment schemes, others are seeking other, more sustainable ways to improve their cash collection processes, such as upgrading to more intelligent construction accounts software solutions. Take a look at how better information can help you to take control of your cashflow.
The bigger, financial picture
Before you take on a new job, you should have a clear idea of your budget, timeframe and just how much you’re set to profit, which is where your accounting software will come in handy. A construction accounting software package would enable you to gain a truer financial picture via accurate job costing, as contract costs are recorded by activity or resource against the relevant contract before being tracked against budgets. By being able to assess just how expensive and ultimately profitable a given contract will be, you can determine whether or not it is worth taking on at the risk of not being paid on time. You would also be able to keep a record of the contracts that have caused you more hassle than it’s worth in the past, and avoid these firms in the future.
Keeping an eye on the payroll
When a client fails to pay you on time, it’s the whole company that suffers – and that includes your employees or subcontractors. If a client pays late it usually means you are forced to pay your subcontractors and staff late too, which can cause friction within your company. To ensure that you are able to pay them successfully and as soon as possible with minimal fuss, you’ll need a subcontractor software solution that allows you to make payments by cash, cheque or BACS as frequently as you like, and enables you to prepare information and send it electronically to HMRC. This way, when you do finally get your hands on the money you’re owed, you can divide it as necessary without further delay.
While you might not be able to force clients to pay you on time, you can at least do your part and remain in control up until payment. That way if the situation worsens, you have the appropriate documents and invoices in place to state your claim. The purchase order processing module included in Integrity Construction software enables you to produce and manage material and subcontractor orders with ease, incorporating goods received notes as well as final invoices. You are then able to distribute invoices and any other necessary documents immediately via email, or by printing them and popping them in the post the same day. Should you need to locate a past invoice, you can do so quickly as all data will be stored on your computer and can be easily located.
At Integrity Software we understand the disruption and damage late payments can cause to a construction firm, which is why we recommend making the most of our construction accounts software to help you better manage your accounts, invoices and subcontractor payments. If you’re interested in finding out more about the benefits our software can offer for your business, get in touch with a member of the team today.
Are early payment schemes a great solution to the late payment problem in the construction industry, or are they unfair?
Payment for contractors and subcontractors in the construction industry isn’t just held up by late payments, but also by lengthening retention payment periods.