Jane Embury, Wrightstyle’s finance director, welcomes a government consultation.
As a company within in the construction industry supply chain, we understand the pressures on everyone’s bottom lines.
Construction can involve hundreds of suppliers and sub-contractors. The more complex a building project, the more companies are involved. But one of the problems that has beset our industry for too long is the length of time it can take to be paid.
A common refrain from within the supply chain is that invoices due for payment can’t be paid. Someone further up the supply chain hasn’t yet been paid.
So, we welcome a government consultation on proposals to make payment rules for businesses tougher. The consultation from the Department for Business, Energy and Industrial Strategy (BEIS) closed last week.
The department wants to engage with current signatories to the Prompt Payment Code on a strengthened Code. Among different proposals is a plan to commit signatories to pay 95% of invoices to smaller businesses within 30 days.
Compliance
In addition, to pay 95% of invoices from all other suppliers within 60 days.
Currently, signatories to the Code only undertake to pay suppliers on time within the terms agreed at the outset of the contract.
The consultation is also exploring the possibility of measuring compliance. This would be assessed by the percentage of invoices paid to terms and the average time taken to pay invoices.
Those who are compliant would then be able to display a logo on their company websites, contracts and tenders. This would be a visible demonstration to their suppliers that they value everyone in the supply chain. This is something that’s currently lacking.
The good news is that some 300 organisations have signed up to the Code during the Covid-19 pandemic, according to BEIS.
The department says that it is “keen to maintain this momentum.” It also sees a reformed code “as a key lever in improving payment practices across companies and organisations of all sizes.”
Retentions
The past reality is that many companies in the construction sector have seen their cashflows squeezed. Squeezed by other companies further up the food chain.
For example, Wrightstyle doesn’t put retentions against our installers. We feel that to be archaic, hard to monitor, and if you have a good relationship with your supplier it is totally unnecessary.
Our installers do the job and invoice when they’ve finished. We then pay them 30 days monthly and we do not take any retentions. We have an excellent relationship with our installers and know that, if we have a subsequent problem, they will rectify it. This rarely happens.
The issue of prompt payment is a historic problem that has been allowed to become endemic – indeed, accepted – within the industry.
Now, in a trading environment that has seen unprecedented disruption, it’s time that it stopped.
A reformed Code isn’t just overdue, it’s vital to growth in the sector – a sector that, in turn, is vital to the country’s prosperity.
Photo by Micheile Henderson on Unsplash
