General Construction 838 views Dec 03, 2018
Online systems offer solutions to curb late payments

Since the construction giant Carillion’s liquidation at the beginning of the year, the government has released regulations to target late payers in the public sector in an attempt to resolve the delayed payment crisis. In light of this government order released a few months ago by Parliamentary Secretary Oliver Dowden, private sector clients and developers have been asked to follow suit in order to assure transparency and reliability across the entire sector.

But what are the solutions to stop delayed payments from occuring? Matthew Jones, CEO of Open ECX, discusses how the industry might tackle this issue collectively to put better payment processes into practice.

Recent government intervention in lieu of Carillion’s collapse exemplifies how much of a grave inconvenience delayed payments can be, especially if left unresolved. In effect, government measures will make it easier for subcontractors to report poor payment methods to the authorities. In an ideal world, no business wants to add to the stress already evident during the invoice and payment process, whether large or small scale. Although delayed payments can occur for a variety of reasons, whether related to unsolicited administrative errors or employee illness, contractors should still strive to make the subcontractor payment process as easy and straightforward as possible.

In order to prevent late payments, the government will offer advisory, constructive workshops to help companies with their project management and payment plans. Solutions such as these should help prevent any delayed payments, allowing contractors the time to consider the impact of their delay and providing contractors with helpful advice to better manage their current payment processes. Overall, this initiative will ensure employees and businesses will not suffer as a consequence.  

Even though the Carillion collapse is a stand-alone case, nonetheless, it begs several questions on how and why payments were so late. But moving forward, it is important to identify key solutions to prevent further financial catastrophes from occuring. All contractors desire a risk-free environment in which their payment processes are rigorous, safe and reliable; such solutions allow contractors to be more organised and efficient with their payments, preventing any late payments from slipping beneath the surface.

A potential solution is to digitise all payment and invoice processes so that contractors pay their subcontractors in a timely fashion whilst maintaining a healthy, risk-free environment for themselves. Designed for medium to large contractors, WebContractor is a useful tool which manages the subcontractor applications for payment process, as well as other subcontractor concerns; insurances and bonds, self-billing invoices, authenticated VAT receipts, minor works, work order instructions for example, offering a great solution for the industry as a whole.

Subcontractors access an online portal for easy and timely submission of payment applications while contractors take advantage of the workflow and reminder features designed to streamline the management of approvals. For contractors, this is a great support mechanism, designed to enhance visibility, control and compliance of the subcontractor application process, lightening the associated administrative workload. Not only do digital processes alleviate any messy paperwork from mounting up, they ensure both contractor and subcontractor are kept up to date with payments and invoices. 

Contractors benefit from increased efficiencies, improved clarity around cash flow, and a far more accurate understanding of their liabilities at any given time. Potential risks, such as litigation, can be potentially avoided, as a thorough, reliable system such as WebContractor has been employed.

Subcontractors gain visibility of the progress of their various applications for payment – something that will help them with their business planning. Applications for payment are securely stored for subcontractors and contractors to access payment applications at any given time.

Time is always of the essence especially in terms of managing cash flow, meaning digital platforms are a sensible and necessary solution to combating late payments. With the right technology, processes associated with applications for payment can become efficient, standardised, transparent and quick. Most importantly, the automation of these processes can allow for tracking and management across the whole supply chain, which reduces risk and helps to build a clear and transparent picture of the finances affecting the business.

Digitised systems for management of subcontractor invoices are the solution to stop late payments from occuring. Whilst the government’s recent measures must be recognised as offering an opportunity for both the public and private sector to push for change in the industry, services such as WebContractor are a tangible, accessible method to ensure contractors keep on top of the multiple payments they have to process each month. Given subcontractors can send payment applications directly, without the need for manual submissions, it improves accuracy, hastens the process and eliminates time costs as well as lost paperwork. Enhancing methods for managing applications for payment across the sector will benefit the industry’s credibility plus the health of all businesses operating within the sector.

Even though it was a dark time for the construction industry, many positive lessons for the future can be learnt from Carillion’s collapse. Seeing the implementation of government intervention signifies the level of support it is willing to give the industry. But internal measures must also be taken by the industry itself, where digital application for payment and subcontractor management platforms are a worthy solution. Not only do these systems ensure subcontractors get paid on time, they reduce risk to contractors’ businesses. Turning to more rigorous, digital payment processes will preserve contractor and subcontractor integrity and the wider construction industry as a whole.