Could late payments cause a crisis in your Construction Business?

Statistics from the ONS show that the construction sector continues to struggle and forecasts for recovery vary. 

Some reports indicate a slight improvement in the construction sector whilst others report shrinking contract size and volumes, putting real pressure on prices.

The extent of the public sector spending cuts may also lead to the cancellation of planned building projects.  There are also concerns that clients may try to retain retention monies ever longer. Alongside this there has been an increase over the last 18 months from new customers demanding credit insurance.  Whilst the premiums may now have stabilised the initial increase was not without pain.

With construction administrations and receiverships on the increase, there is a risk within the sector that businesses will not be able to collect construction debts owed to them.  Media reports reported that –based contractors are estimated to have lost over £456,000 when Wigan-based housebuilder McInerney Homes went into administration.

What can you do to protect your business?

• Know your customer – understand their business so that you can pick up early warning signals;
• Set boundaries for their account by providing updated terms and conditions and set a credit limit;
• Ensure accurate and timely invoicing;
• Pick up the phone at the earliest sign of non-payment and resolve genuine problems quickly to avoid payment delays;
• Build a relationship with your customer’s accounts payable team so that you can have realistic conversations about non-payment.
• Use specialist debt collection teams to help you to recover outstanding debts. They can do so whilst protecting your relationship with your customer.