How those in the construction industry can prevent bad debts

In comes as no surprise to those in the construction and building supplies industry that their’s has the highest rate of insolvency in the country.

Since 2014 builders and their sub-contractors have been going out of business more than any other sector according The Gazette – the Government’s recorder of insolvencies.

Writing in The Gazette, Wombie Bond Dickinson (UK) LLP solicitor Philippa Jones gives some tips on how those in the building industry can protect themselves against bad debt following the disaster of Carillion. Some are fairly basic such as obtaining credit checks on firms that are causing concern – something you can do with ICSM Credit. While others such as Parent Company Guarantees are less well known.

Other ideas include inserting a Retention of Title clause into the terms and conditions allowing a sub-contractor to legally take back materials and equipment on a site after the construction company has gone bust.

The construction industry is notorious for the use of subcontractors and for a race to the bottom in terms of pitching for a tender leaving little room for unexpected costs, bad weather or unforeseen problems. It’s not unique in industry as other sectors such as haulage, printing and sign-making also have similar problems.

Philippa Jones said: “Finally, the domino effect reflects the impact the insolvency of one party higher up the chain can have on others, such as a main contractor on a subcontractor. The failure of one business can have adverse effects for others in the chain who are reliant on the project income to fund their works.”

She said: “The construction industry suffers from an almost unavoidable lag between work being performed and payment being received. Contracts often provide for stage or periodic payments in arrears. This can result in the supply chain carrying significant work in progress until payment is received.

“Cashflow issues can result from this payment delay if businesses have to wait up to 90 days or more for invoices to be paid, or in some cases (for various reasons) as they may not be paid at all. Ultimately, late payments and bad debts are the main triggers for insolvency.”

The article is very stiff, and it should be remembered the author is a solicitor, but it is worth a full read.

See: https://www.thegazette.co.uk/all-notices/content/103418

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send at email to Ian.carrotte@icsmcredit.com