Anyone working in the construction industry will be aware that late payment is an ongoing issue that has caused the demise of many a supplier and sub-contractor. Typically, the problem is that some main contractors delay payment for as long as possible to support their own cash flow, with disastrous effects on the cash flow of their supply chain partners. Given the importance of financially viable sub-contractors to the health of the construction industry, the Construction Industry Council (CIC) is now trying to address this issue.
Enhancing visibility of payment data
In doing so, it will require larger companies to submit more detailed reports about their payment strategy and history, whilst smaller companies will need to have good visibility of the appropriate data to support their own cases.
The CIC’s strategy is to achieve 45-day payment periods by summer 2016, reducing to 30 days by 2018. These will be a significant improvement on the more than 100-day payment delays that are still common within the industry.
In parallel, the Small Business, Enterprise and Employment Act 2015 will empower the Secretary of State to impose regulations on companies relating to their payment practices and policies. It is very clear that this Act is targeting large companies and is unlikely to require compliance from SMEs.
Large companies affected by these regulations will be required to report on their payment policies every six months, as well as to disclose any disputes resulting from late payments and their track record on retentions. Any failure to report accurately and on time could lead to criminal charges against directors.
Furthermore, the content of these reports will be accessible online and will therefore impact on the company’s public image and, for quoted companies, the perception of shareholders.
In improving their payment culture, such companies will need to ensure they have good visibility of all of their transaction data.
Potentially this could be onerous in terms of the time and resources needed to collate the required information. However, those companies that have deployed an e-Invoicing electronic trading solution are finding that all of the information they need is readily accessible, in a format that makes it very straightforward to generate many different types of reports.
Experience shows that the e-Invoicing platforms that deliver most benefits to their users have been widely adopted by the company’s supply chain, taking advantage of flexible connection options that suit different kinds of companies. The wider the integration through the supply chain, the better the visibility of key data.
The e-Invoicing system should also deliver full integration with your own finance system, so that transactions are automatically validated and the data available is accurate and auditable.