An industry report has found that an astonishing £2.8bn in bad debts are written off each year by subcontractors due to non-payment – we look at how construction accounting software could help.
The study, conducted by Bibby Financial Services and The Vinden Partnership, surveyed 250 UK contractors across a variety of trades to answer questions raised by the collapse of Carillion in January this year. Carillion was the UK’s second-largest construction company, with up to 30,000 businesses in its supply chain and 200 government bodies signing contracts with them. What does this mean for businesses and how can construction accounting software help?
Following the company’s liquidation, it seems that fundamental issues became apparent: 53% of survey respondents said they had written off money as bad debt in the last 12 months, with an average of £16,000 lost as a result. A further 44% claimed construction contracts are difficult to understand and 47% said that Carillion’s collapse has made them wary of working with large main contractors.
Kash Ahmad, UK Specialist Director at Bibby Financial Services, said: “Bad debt is a serious issue for many construction businesses. The Carillion situation has highlighted three fundamental issues in the sector: endemic late payment, bad debt and complexity of contracts. Each of these issues needs to be tackled by both the public and private sectors.”
The Subcontracting Growth 2018 report also highlights significant factors the construction industry should be wary of: a change in the scope of work partway through a project, queries over the quality of work and disputes over contracts are among the top reasons firms lose money.
Eque2’s construction accounting software solutions, EVision and Construct for Sage, help your company avoid these problems, save money and manage projects more efficiently. A change in the scope of work partway through a project should never pose an issue: EVision construction accounting software from Eque2 is designed to provide larger contractors with complete visibility of projects and a single version of the truth across the business.
Meanwhile, SMEs (small to medium enterprises) have been reporting that, prior to using Construct for Sage, they had been missing variations every month and getting caught out by unexpected invoices. Those invoices had to come straight out of the profit of a job since, by that stage, it was too late to go back to the client to adjust the charge or the scope of the project.
With queries over the quality of work, Eque2’s construction accounting software helps construction companies monitor the performance of their subcontractors; this in turn helps to provide quality assurance and, most importantly, give evidence of it. As disputes over contracts typically arise when there is an absence of structured processes for agreed payment terms or the scope of projects, EVision and Construct for Sage assist contractors in managing the full construction and contracting lifecycle.
Construction accounting software can help your business to avoid common industry pitfalls, giving you back control of your projects and protecting your profits.