Reducing payment delays: Why spreadsheets are not your friend
The construction industry has long been maligned for its poor payment practices. Many of the largest contractors are typically taking more than 60 days to pay upwards of 20% of their invoices, with average payment times often extending to 40 or 50 days.
In response, the Government has cracked down on the issue with the introduction of its prompt payment policy. This means that since 1st September this year, companies that do not pay 95% of their subcontractors within 60 days risk being barred from bidding for public projects.
Cash flow is king
The problem with late payments and elongated payment terms is the effect they have on cash flow.
Ensuring that enough cash is flowing into the business at the right time, so that bills can be paid on time, whether for labour, plant or materials for a particular job, or for monthly costs such as staff salaries, business premises or vehicle leasing, is essential to maintain a healthy business.
But what does estimating have to do with cash flow?
At first glance – estimating for a contract would appear to have little to do with a company’s cash flow. Surely, it’s the responsibility of the customer or contractor to pay on time?
This is true, but problems can arise when initial estimates are inaccurate. When this happens, the time taken while customers contest bills can roll into weeks or months, with a potentially fatal effect on company finances.
The flow of funds between main contractors, subcontractors, and suppliers is a finely balanced machine. If your customer doesn’t pay you on time due to a dispute over the final invoice, this can have a significant knock-on effect throughout the whole supply chain.
Get your quotes right first time
To minimise the risk of payment disputes, it’s vital to get your quotes right first time, whether you’re pricing up for groundworks, carpentry or decorating.
This may be easier said than done. However, with the right tools, systems and procedures in place the task is much more manageable.
Why spreadsheets are not your friend
No matter how sophisticated your spreadsheet, it is not the best tool to use for estimating. Even if it has taken years to hone and is carefully colour-coded with complex macros and bespoke formulas designed specifically for your individual business needs, it is still not the best tool.
Spreadsheets are prone to manual error, especially when individuals are under pressure to meet tight deadlines. A single inputting or formula mistake hidden in the depths of hundreds of individual sheets, can easily be repeated and extrapolated, with the potential to cost the business dearly.
Moreover, complex spreadsheets are often developed and owned by individuals, making it at best difficult and at worst impossible for others to navigate if that person is on holiday, off sick or leaves the company.
Eliminate mistakes with software designed for the job
Instead of using spreadsheets, choose a piece of software that is specifically designed for the job. Well-designed estimating software such as ConQuest cuts the risks of manual mistakes and automates many time-consuming tasks.
Eliminating manual processes helps to ensure more accurate quotes, reducing the risk of future payment disputes. In addition, a robust audit trail helps with providing a rapid and accurate response to any invoice query.
Keeping the cash flowing is essential to all businesses, particularly when payment terms are often already challenging. By ensuring accurate quotes first time, every time, you’ll be well-placed to avoid damaging payment disputes.
