The UK construction industry as a whole tends to cling on to outmoded and inefficient payment practices even when presented with more effective ways of working – a point that is particularly valid when it comes to working capital management and payment processing, writes John Vasili, Director of Business Development at Invapay.
The construction industry has a long-standing problem when it comes to B2B payments. The NSCC & FMB Payment Survey revealed that 40 per cent of businesses are not paid within contracted terms, a third of payments due are late – representing 4.4 per cent of turnover on average – and that subcontractors write off £200 million in late payments and retentions.
Clearly, there’s a need for a more efficient way of processing and making payments – one that will benefit businesses of all shapes and sizes and at all stages in the construction lifecycle, from major contractors right down to specialist subcontractors and general suppliers.
Through our partnership with Open ECX and their WebContractor offer we have developed a combined full-service payment solution, providing construction businesses with a quick and effortless way to manage their payment processes and maximise working capital benefits. The direct and indirect benefits to businesses and their suppliers are multiple.
We find that one of the biggest barriers to the adoption of ePayment processing solutions for many businesses is supplier acceptance – with businesses concerned that the implementation of a revised payment processing approach will have a negative knock-on effect for their suppliers. In our experience, this fear is misguided. Our customers tell us they want to maximise their working capital and to get best use of available credit lines but are concerned about the impact on suppliers.
We solve this issue by simply making payments to the suppliers standard bank account– the supplier doesn’t need to know they are being settled via your working capital or available credit lines; all the while operating in the FCA regulated environment and the assurance that brings.
Our customers benefit considerably and are able to maximise the return on working Capital & to fully utilise any credit lines buyers may have available. They can also make accelerated payments to suppliers, whatever the size, thereby securitising the entire construction supply chain.
Our Open ECX colleagues have also faced concerns over supplier acceptance. Their e-invoicing solution automatically converts and validates PDF invoices received from suppliers, completely removing the need for time-consuming manual entry and eliminating human error.
For suppliers it provides them with the benefit of a reduction in payment delays often caused by traditional processes.
Open ECX has found that supplier adoption is often rapid. One builders’ merchant that stocks more than 13,000 product lines across 13 branches, saw the percentage of e-documents being processed rise from around 25-30 per cent to 60 per cent in a matter of months; this led to huge time and efficiency gains, allowing them to redeploy staff to focus on higher value tasks.
There is absolutely no reason for businesses to continue to operate an outmoded payment approach. There is a tried, tested and regulated alternative delivering major efficiency and cashflow benefits for both sides of the construction supply chain.
And unless we as an industry are willing to adapt, then we are resigned to not achieving the best payment practices, return on working capital and suppliers hindered by late and delayed payments for many years to come.
For more on Invapay’s partnership with Open ECX visit https://openecx.co.uk/maximising-payments-maximising-cash-flow/