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Payment – claiming what is rightfully ours

One issue which unfortunately is of perennial concern is that of late payment. In the context of our businesses, this is usually the result of bad practice on the part of main contractors. When I hear stories of flooring companies suffering from the effects of late payment, I know that they are not just moaning or being unreasonable. This is an issue of real concern, which can cause businesses to fail, particularly smaller ones, of which there are many in our industry.

Construction News has just reported that business failures in construction in the first quarter of 2023 were worse than in any other sector and made up one fifth of all insolvencies – that’s 4,165 firms gone to the wall. High energy costs, inflation and having to repay Covid-era loans were cited as the main reasons for companies’ difficulties, but late payment by customers would have certainly aggravated the situation in many cases.

It is not as though there have not been attempts to improve the situation. Government legislation passed in 1998 allows businesses to charge late payment on invoices, and this was amended in 2013 to allow businesses also to charge for their time in chasing late payers. The Government has recently initiated a Payment & Cash Flow Review, to which the CFA has made an input. Improved contract terms have also been the focus of recent Guidelines issued by Build UK, as part of their Recommendation on Contractual Practice.

However, the situation of companies being forced to wait extended periods of time for payment still unfortunately persists. That is why CFA considers this topic to be one which requires consistent focus, and Richard Catt’s article in this issue of CFJ also talks about the problems that late payment can cause for member companies.

My own experience within Westcotes indicates that poor payment practices remain a very significant problem at the sharp end – and I would urge you to support the work of the CFA in trying to tackle this. At Westcotes, as an established business, we have made the necessary investment in our own systems and have also increased the numbers within our commercial team and credit control staff to ensure we are on top of getting paid to reduce the risk of late payments or undervalued applications.

You have to keep paperwork well-structured both on site and in the office, have all the required back up and adhere to valuation dates without fail! In fact, you have to be well-organised throughout the business, including input from the fitting teams and contract managers. It is important to record how a job is progressing, along with capturing any variations that may arise.

As an example we take numerous photos daily to create a ‘picture record and story’ of a contract and ensure that if there are any queries relating either to quality or quantity of work completed, they can be answered promptly and fully, so that an application/invoice cannot easily be disputed. We also have the back-up of our industry specific quantifying software to provide further substantiation for the client. It is also important not to start work at all, unless your site team are fully happy that a site is ready. This links back to issues covered by the CFA’s Winter Warning campaign. Careful site preparation helps to prevent failures and reasons to avoid payment.

You should also be alert to the ‘tricks of the trade’ that main contractors occasionally pull to get more out of the supply chain. One that we experienced recently related to ‘health and safety patrols’ sending subbies pictures of instances of where they believe the subbies had contravened site rules in relation to housekeeping and then charging £500 just to issue a notification of a clear-up notice.

Sometimes these aren’t even genuine, such as a pallet of wood being left on-site to acclimatise, with prior agreement, but then a photo emailed, with the wood described as waste and a fine issued.

Most of the time it feels as though we are trying to avoid main contractors’ attempts to unfairly withhold payment, even when the evidence points to a job well done, ie, a successfully fitted floor. Inevitably there is a cost attached to dealing with all this and you do sometimes think that main contractors would be better spending their time managing their sites properly and ensuring quality, rather than preying on those who cannot defend themselves as well as we have learned to.

It can be especially tough for small businesses of course and unfortunately it causes too many businesses to throw in the towel and only work for direct clients in the RMI sector. How healthy is that though, as it could take high quality well-run businesses out of their traditional sub-contractor roles and even lead to a diminishing of quality in the sector overall? Meanwhile the requirement for companies to manage, or even reduce, their client base, to be totally rigorous about terms of payment and credit control, has an obvious impact on business costs and profitability in the sector as a whole.

It would be a lot easier if main contractors just stuck to their agreements and paid up what they have agreed to pay when they’ve agreed to pay it! In the hope of improving our business culture, CFA totally supports the efforts of Build UK and others to improve things, in the firm belief that this will make all our lives less stressful and also improve customer confidence, efficiency and profitability throughout the supply chain.
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