Early payment schemes – which see a contractor’s outstanding invoices settled in advance by lenders in exchange for a nominal fee – are nothing new to the construction industry. These have been available for some time, but thus far it’s only been the very largest contractors that have been able to take advantage of them. All that is set to change, however, as early payment schemes roll out across the construction industry.
Nucleus Commercial Finance has revealed that, as of this year, medium-sized contractors with an annual turnover of £20 million or more will be able to make use of its early payment schemes to better streamline their cashflow processes. Talking about early payment schemes, Nucleus Managing Director Chirag Shah said: ‘suppliers like the scheme because it gives them a guaranteed cashflow and certainty of payment. Main contractors also benefit from a more predictable cashflow while they can build better relationships with trade contractors by offering them favourable terms.’
Not everyone agrees with Mr Shah on the impact that early payment schemes have on the construction industry, however. Earlier in January, Integrity Software reported how SEC Group chief executive professor Rudi Klein labelled early payment schemes both ‘an industry disease’ and a cancer within the industry.’ Professor Klein’s criticisms centre on the fact that early payment schemes are perceived as being unfair to subcontractors and potentially present barriers to growth.
Where do you stand on early payment schemes? Is Nucleus’ announcement just what your company needed or a potentially damaging move for the construction industry? If you’re having problems with your cashflow processes, consider using Integrity Software’s construction accounts management software to help.