One of the problems that have plagued the construction industry for years continues to persist: late payments. This familiar foe to contractors everywhere shows no sign of weakening, as two recent surveys confirm.
The first survey, conducted on behalf of the Federation of Small Businesses, found that 51% of its members had been paid later than the agreed date by large businesses. Of the affected firms, 34% said late payment impacted upon their profitability, 32% had to pay their suppliers late, and 29% found that late payments restricted the growth of their business.
The National Specialist Contractors Council (NSCC), which comprises over 30 specialist trade organisations representing thousands of businesses, including many in the construction industry, also carried out a survey on late payments. 76% of respondents said they experienced payments of between 30 and 60 days. Respondents told the NSCC that ‘late payment is a killer’ and ‘we have a good workload and repeat work but late payment means that our cash flow is always critical.’
In January, we’d heard that the average payment time had fallen slightly – from 90 days to 85 days. Unfortunately, it appears that the improvement hasn’t been maintained as the year has progressed. Despite ample opportunity to address late payments in the 2014 budget, sadly this was one area that George Osborne dedicated little time to.
Late payments have a domino affect on other members of the industry, with end clients, builders’ merchants, construction firms and suppliers all affected. Cashflow problems lead to businesses having to seek alternative methods of finance or sign up to early payment schemes, which add another outgoing to your balance sheet.
If you’re struggling to keep track of your revenue and costs, construction accounting software could help you, with specialist modules designed just for the construction industry.