A sector under strain
The construction industry, one of the pillars of UK infrastructure development, is also one of the sectors hardest hit by late payments and unpaid invoices. With complex supply chains and numerous stakeholders involved in each project, the sector faces a persistent challenge: unpaid invoices that create a ripple effect throughout the industry. Raising awareness of the severe impact of late payments is crucial as smaller firms in particular bear the brunt, threatening both their stability and growth.
The staggering stats behind construction payment delays
According to research by Atradius, construction firms face average payment delays ranging from 75 to 90 days, nearly triple the typical 30-day payment terms expected by most businesses.
This prolonged wait for payment places many construction businesses, especially smaller subcontractors, at a distinct disadvantage. They are often forced to finance ongoing projects without the certainty of timely cash flow, making them vulnerable to financial instability.
Larger contractors can also impose unfair payment terms, which puts smaller businesses in a precarious position. This power imbalance is not just a financial strain - it disrupts operational efficiency and fosters an environment where cash flow problems are endemic.
The ripple effect of late payments
Late payments in the construction industry don't only affect the immediate recipient of an unpaid invoice. The repercussions cascade throughout the supply chain. Subcontractors delayed in receiving payments may, in turn, struggle to pay their own suppliers, creating a knock-on effect that disrupts the entire project. Ultimately, delayed payments can lead to stalled projects, increased borrowing costs, and strained relationships between contractors and suppliers.
For many construction firms, cash flow is the lifeline of the business. When that flow is interrupted, businesses may have to halt operations, delay new projects, or, in the worst cases, shut down.
This disruption affects not just the firms involved but also the broader economy, as delayed or cancelled projects slow infrastructure growth.
Debt write-off: The final blow
When late payments turn into bad debt, the consequences can be dire. Construction companies, particularly smaller ones, often find themselves in situations where they are forced to write off substantial amounts as bad debt. This is especially common when working with larger contractors who may go into liquidation or simply refuse to pay. The financial impact of these write-offs can push companies into insolvency, erasing years of hard work and jeopardising jobs across the sector.
For firms that are already operating on tight margins, debt write-offs are not just a setback—they are often the final blow. Many businesses are left with no choice but to cease operations entirely, further exacerbating the industry's struggles with sustainability.
Paycada’s solution: Automating and accelerating payments
At Paycada, we understand the significant challenges construction firms face when it comes to managing their receivables. Our platform streamlines the invoicing and payment collection process, reducing the risk of delayed payments.
But we don’t stop there. Our Enhanced Collection Service, powered by our sister company Bluestone Credit Management, an FCA-regulated collections agency, goes one step further by helping businesses recover debt more efficiently.
With a focus on maintaining professional relationships, this service is designed to support businesses in the construction sector in securing the cash flow they need to continue operating smoothly.
A call for action
The construction industry’s ongoing battle against late payments requires more than just awareness - it demands action. Now is the time for businesses to take control of their payment processes and safeguard their future. By embracing technology, construction firms can not only mitigate the risks of late payments but also thrive in an industry that is essential to the economy’s growth.
