Avoiding Unpaid Bills in the Construction Industry

7 August 2019

paid invoice letter

Cash Flow; it’s the beating heart of any business.

In the construction industry, keeping cash flow steady can be the difference between a big project running effortlessly and finding yourself jumping in to hurdle after hurdle. Chasing unpaid bills can sometimes feel a little taboo and even give a sense of guilt if you feel like you’re having to put pressure on someone else to ensure invoices and bills get across the line on time.

At Copronet, we have a number of tools that will help you grow, manage and protect your business, including the credit rating tool, Project Hub and our Work Search tool. These will help you facilitate every step of the project journey from feasibility to handover.

Here are some ways we believe you can avoid unpaid bills when working in the construction industry:

Know your interim rights

Everyone should know the interim payment system like the back of their hand. After major amendments to the Housing Grants, Construction and Regeneration Act in 2011, contractors now have a more structured safety net in place to help ensure payments have to happen.

For any contractors whose team are on a project that lasts 45 days or more, you have the explicit right to expect payment for any work in that period. We highly advise learning what the act provides contractors as many facets to it go unnoticed.

For example, did you know that if your client fails to provide you with a payment notice, you (the contractor) can send a default payment notice as a sign of grace? If the client can’t agree with you on a pay less notice, they must pay the default notice’s full amount.

Invoice Breakdown

It can seem a little too much but segmenting your invoices to be paid in intervals can help lighten the burden of chasing unpaid work.

You may want to set up an invoice policy that will see you get paid by breaking the workload into significant stages or milestone events that are clearly identifiable and can be acknowledged by both parties. This will help cash flow remain somewhat steady for a specific project.

Be Proactive

The biggest reason for having to chase your bills is simply because someone forgets all about it. Before having to feel that you’re nagging to get attention on a late payment, flip the switch and send your client a preliminary notice (i.e. notice to order) which highlights what the status of a project is, who is working on it and when you expect payment.

Some clients might scoff at being told “too early” that they have to pay but sending out such a reminder regularly puts you in the position of always getting paid on time.

We also advise getting all notices created way ahead of time and storing them in your Copronet account. Having one point of access and being able to send them directly to your client helps immensely. Sending them online also puts a time and date against your notices.

The Non-Completion Conundrum

Doing your end part on a major project is great unless outside factors create an ill-fated non-completion. A project ceasing or falling through in part can have a heavy burden. That’s why your contract must contain a non-completion clause, on top of the verbal agreement that you and your team are guaranteed payment.

Make all parties aware of this clause too, so no one feels blindsided.

You can get interest

The Late Payment of Commercial Debts (Interest) Act 1998 could see you entitled to at least some interest if payments are delayed or late, especially if your contract is based on payment upon project completion.

Know that you can stop and up tools

You always have the right to suspend work on a project if the client is avoiding payment, although you can’t just think you’re starting a mutiny.

If payment is getting dragged out and communication is fraying, you can give your client seven days’ notice that your team will suspend work if payment has been delayed beyond a reasonable point in time.

Always follow due process

This last tip is something you should follow when you’re stuck with the worst-case scenario.

Failure to receive payments could see you end up in court arguing your case to get paid. Getting to that stage is extremely rare but highlights the need to follow the payment process to a tee.

To avoid ever hearing “no, we didn’t get sent default payment notices your honour” while in court, it needs to be known by all parties that you corresponded fully. That means sending your default payment notice, additional invoices and all correspondence by recorded delivery. Keeping a record of the paper trail like this ensure there is no leeway or excuses of a lack of communication.

Need help to manage and protect your business?

Join Copronet for free today and see just how easy our platform can help you avoid late or non-payments via our Finance Checker, brought to you in partnership with Creditsafe, one of the UK’s most respected business credit rating agencies.

We can also help you manage every step of your project with our easy to use Project Hub tool.

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