Companies failing to use solutions to late payments
Companies are making little use of cash flow solutions despite late payments continuing to cause serious problems.
Two-thirds of companies surveyed by Construction Industry Collective Voice (CICV) were hit by changes to payment terms and time spent chasing outstanding invoices
Half had sought external assistance to deal with payment disputes, with 54% saying they had referred a dispute to adjudication.
But while 62% of those surveyed said they were aware of project bank accounts, only 17% had actually used them.
CICV’s Len Bunton said: “From these findings, it is clear – and also rather depressing – that cashflow and payment issues are still major problems in the construction industry in Scotland.
“It is especially frustrating to see so many financial disputes still going to costly adjudication and so little take-up of solutions like project bank accounts and the Conflict Avoidance Process – despite evidence that they do work and help to improve all-important cashflow.”
The survey also invited respondents to provide anecdotal evidence of cashflow and payment issues, along with suggestions of how to improve the current situation.
One said: “I’d like to see less sub-contracting and more directly employed trades so there’s a joined-up process and effectively one large purse with collective ownership. The minute we sub-contract we divide, and priorities, focus and responsibility aren’t truly shared.”
Another told the poll: “We have problems with the public sector with too many authorisations that prolong and delay payment. A simplified process would help.”
A third added: “Many years ago, main contractors had to show proof of payment to sub-contractors before they received their next payment. Implementing such a practice for all sub-contractors would hugely improve the payment process.”
While a fourth respondent said simply: “Employers need to be held accountable and measured against the agreed payment terms within the building contract.”
The CICV is now devising a series of measures to help combat issues highlighted in the survey, including the imminent publication of a best practice guide. The collective is also planning an online webinar, offering contractors practical advice to help them avoid payment pitfalls.
David MacDonald, also of CICV, added: “The many troubling issues highlighted by this survey simply reinforce the need for the industry to resolve matters before they escalate into disputes.
“The best practice guide, to be published by the CICV shortly, is designed to be used to eliminate poor commercial management and assist contractors to be much more alert to potential problems and risks.
“The planned webinar will also help contractors navigate the perilous waters of payment, which are clearly still littered with many difficulties.”
The survey is the latest in a string of practical and constructive initiatives launched by the CICV since its creation as the Construction Industry Coronavirus (CICV) Forum in March 2020.
Made up of 28 trade associations, professional services bodies and companies, it has maintained a steady supply of information and practical advice to the sector as well as carrying out surveys, producing animations and posters, hosting webinars and maintaining close dialogue with Scottish Government ministers.