- 24 May
Average Payment Days In The Construction Sector.
Payment days in the construction sector are averaging between 75 and 90 days, according to a report in Commercial Risk, accredited to Atradius - the credit insurer.
Slow Customer Payments In Construction
The construction sector is well known for payment delays and so it may come as no shock that the average payment days in the sector are between 75 and 90 - that's almost 3 month delays at the top end of that average.
The article, quoting that research by Atradius, goes on to say that Atradius expect 2019 to be another challenge for the construction sector as payment delays and insolvencies combine to create a "perfect storm".
A Solution To Late Payments For Construction Companies
We have lots of guidance about getting paid promptly, on this site. However, the problem of late payments is widespread within construction, and an alternative solution may be required.
Construction finance (also called invoice finance or funding against applications for payment) is a possible solution that will allow customers to bridge the cash flow gap between requesting payment, and getting paid. This kind of finance is only provided by a small handful of funders that specialise in the construction sector.
According to our research, the majority of construction sector companies raise "applications for payment" rather than sales invoices, and these funders are able to finance against applications, as readily as sales invoices. Furthermore, they retain specialist QS advisers to understand the underlying supply contracts, and set appropriate funding levels against them. As an alternative to credit insurance, some of these funders are able to include bad debt protection within the funding facility that they offer.
Whilst this type of facility does not solve the late payment problem, it does mitigate the impact, and smooth the cash flow of the subcontractor that can be waiting long periods to get paid.