Builders’ merchant software can play a part in dealing with late payments in the construction industry.
Late payments have become commonplace in the UK’s construction industry. 2014 research by Bacs found that the UK’s SMEs were owed nearly £40 billion in total. 60% of UK SMEs are having to deal with late payment issues, and the average burden on each of these firms is £38,000. In the same survey, a quarter of SMEs said that if the money owed to them reached £50,000, they would be forced to declare bankruptcy. In the construction industry, the issues of retention money and interim payments do a great deal to slow cashflow. A domino effect kicks in, leaving many construction companies unable to pay their debts on time. Builders’ merchants are then faced with having to pay suppliers late, potentially damaging business for all parties. We explain how builders’ merchants can combat late payments with the help of retail software and the implementation of new processes.
Preventing late payments
Ideally, all companies would have thorough processes in place that would prevent late payments from becoming an issue in the first place. Builders’ merchants should consider altering how they manage trade clients, carrying out credit checks on new customers and even searching for trade references from other merchants and suppliers. The terms and conditions of trade should also be signed prior to the transaction, and they should contain all the legal terms you need to get your money through the courts, if necessary.
Additionally, instead of writing invoices out to the company address in general, ask for a name of someone in the accounts department so that it’s easier to chase the payment if it’s not paid on time. You may also consider offering small discounts for early payments, start charging significant deposits on high value items or perhaps even look into invoice financing.
It’s never pleasant to chase debts, particularly if you’ve built up a long-term working relationship with the client in question, but it’s important to have a set of processes in place that ensures your debt chasing efforts are consistent. Tweak your retail accounting software to inform you when payments are overdue, and start chasing them immediately – perhaps through a polite email or phone call. If a week passes and the payment still hasn’t arrived, be tougher over the phone and press them for a payment. If your clients know that you’ll start hassling them soon after payments are due, they’ll know that you take the matter seriously – this should make them pay more promptly in future.
It’s also a wise idea to inform clients that they won’t be able to buy any more goods until they’ve cleared their debts, if the payment is late. Not only will this encourage them to pay up, but it’ll also mean that you won’t fall prey to cowboy contractors who want to maximise their gains without paying a penny. After a certain number of weeks or months of late payment, get in touch with a debt collection company or other third party. A single call from a third party is often enough to trigger payment.
Retail and point-of-sale software enables you to view any of your clients’ accounts at a glance, making the debt chasing process far easier (and more organised) than with paper-based accounts. All our existing Trader users are getting these benefits and if you're not one of them you could too!
Find out about how the other features of builders’ merchant software can help your business thrive in 2015 and beyond.
Trader is an easy to use electronic point of sale system designed for the unique requirements of building, plumbing and timber merchants, hardware and DIY stores in the UK and Ireland.
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