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Cash is king

by Paschal Walsh, UK Regional Director - UK

The construction industry is credit-heavy and complex, a very dangerous combination that often leads to contractors not getting paid on time and/or not receiving what they are due. With the works being carried out on credit, coupled with long and convoluted payment chains, there are many opportunities for money to fall through the cracks. However, with good housekeeping, efficient cash management and new government legislation, it is possible for contractors to protect and enhance their cash position.

Here are our top cash management tips

  • Align payment terms and timings with your client and the supply chain; ensure they are “back to back”
  • Issue accurate and timely notices; good payment administration will mitigate the majority of issues
  • Ensure you provide appropriate substantiation in accordance with the contract; include accurate and factual records where necessary to allow the certifying party the best opportunity to value your account efficiently, correctly and appropriately
  • Do not forget to issue the application even when your QS goes on holiday
  • Review and discuss applications with the client before the payment notice is issued
  • Develop good working relationships with the accounts and payment teams within your client’s organisation and maintain regular contact with them to track your payment through their system allowing you to work together proactively through the process
  • Agree changes as the project progresses; the earlier they are agreed the sooner the cash comes in
  • Discuss, agree and settle set off and contra charges when they arise.This will mitigate any disputes near the end of the project
  • Resolve payment disputes at the time. If you are not happy with a payment notice, it should be challenged as soon as practicable, there may be a genuine error
  • Do not agree ad-hoc payment terms with your supply chain which result in them getting paid before you do
  • If you are required to allow retention, make sure your supply chain does too, and at the same rate
  • Always make time to check supply chain applications and ensure payments are not made before works are complete
  • Keep track of when the cash was received relative to each date when the payments were due. Include any late payment interest charges as a variation. This should remind the client how serious late payments are
  • Check it twice, post it once. Simple errors such as incorrect addresses, contact names, invoice numbers, dates, PO numbers, arithmetical issues and lack of required documentation (insurances/timesheets/signed documents etc) can hold up otherwise due payments unnecessarily

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“with good housekeeping and efficient cash management, it is possible for contractors to protect and enhance their cash position”