With cashflow continuing to be a thorny issue across the industry, it’s never been more important to ensure your payment preparations are in good health. Here, our expert elf delivers a dozen festive financial pointers to help prepare your business balance sheet for the New Year and beyond…
Unfortunately we’re still seeing significant contractor and sub-contractor business failures across the UK, resulting in a trail of devastation for the supply chain.
I’ve recently dealt with payment and cashflow issues for a number of SMEs and the level of difficulties currently being experienced is extraordinary.
After 40 years in the industry I don’t think I’ve ever seen so much chaos and it’s desperately sad to see so many businesses going into administration and good people being made redundant.
It’s essential that FIS Members minimise risk in 2024, so with apologies to the classic tune <<The 12 Days of Christmas>>, I’ve wrapped up a dozen of my own top payment tips to ensure you don’t lose sleep over payments and can enjoy a silent night…
1. Use Mr (or Mrs) Clause – use an experienced professional to analyse any contracts you’re bidding for and highlight any high-risk clauses. This will allow you to discuss the issue in advance and request that the clauses are removed or mitigated. There’s no use doing this after your tender has been accepted!
2. Make a list and check it twice – ensure you have a payment schedule in your contract, setting out the dates when you’ll make an application for payment, what you need to provide, the due and final dates for payment and when a pay less notice will be issued. Stick religiously to these dates – your commercial manager should have them in their calendar.
3. Stay another day – beware your payment schedule running out. If a job runs past the last date in the schedule, make sure it’s extended until you reach practical completion.
4. Talk turkey – payment applications are often rejected or reduced because you haven’t provided the relevant information. Too much detail is better than not enough, so ensure your commercial manager follows up each application with a call to the contractor to establish they have everything they need. There’s nothing worse than getting to the end of the month, only to find your application has been shredded!
5. Follow the star – make sure you do what the contract says about submitting notices. So if it says they must be sent by email and registered post, do that. If it says they have to go to individuals and an organisation, do that instead.
6. Wrap it up – a sub-contractor told me recently that if his money isn’t received by the final date for payment, he issues a notice to suspend the performance of his obligations on site the next day. You’re perfectly entitled to do this and I find it’s a good wake-up call to both contractors and employers.
7. Do you hear what I hear? – you’ll often get an early indicator if there are trading difficulties, so keep your eyes and ears open. If the contractor or employer isn’t paying on time or reducing payments, share intelligence and compare notes with other sub-contractors.
8. Avoid a ding-dong – if you’re delayed, tell the contractor or employer why ASAP and give early notification of an extension of time. Some clients say they don’t want to ruffle feathers, but your priority is your <<OWN>> business. A standard contract allows extensions of time and payment of loss and expense, so take advantage.
9. Head for quality street – quality is still a major issue in the industry, with clients being charged for failing to rectify defective workmanship, remove rubbish and comply with health and safety regulations. The Construction Quality Improvement Collaborative is a major step forward – it’s worth signing up at www.cqic.org.uk to demonstrate your credentials and commitment to doing things right.
10. Jingle all the way – I recently issued a notice of adjudication to a defaulting party who quickly paid up. The Low Value Dispute Adjudication offers a fixed fee for an adjudicator to run such a dispute so you should take advantage – find out more at www.rics.org
11. Goodwill to all men – SELECT is among the many bodies to sign up to the Conflict Avoidance Process (CAP), which you can use as an early intervention to prevent issues escalating and allow you to keep working (and earning). Check it out at www.rics.org/capledge
12. Stuff those turkeys – finally, if you’re working with an organisation that’s repeatedly giving you the runaround, have the courage to tell them their goose is cooked and give them the boot.
In addition to these pointers, please read the CICV’s Best Practice Guide – available to download for free from www.cicvforum.co.uk – to improve your commercial management.
There’s no doubt we’re in for another tough 12 months across the industry but those firms that prepare properly will manage to weather the snowstorms to come.