Amid the continued fallout of Carillion, let the market move construction firms to pay in ways more timely, says one prominent construction executive in the UK. Elsewhere, WEX finds the paper chase a key part of inefficient payment terms in the US and abroad.
The fallout within the United Kingdom’s construction industry, due to late payments, continues. The marquee exhibit in the field continues to be the Carillion failure, which has led to a repeated outcry for more stringent efforts and legislation to monitor and enforce payment terms.
The embrace of legislative redress in payments is not universal. Consider the fact that John Morgan — who helms Morgan Sindall Group, a U.K.-based construction services firm — has said that, as reported in Construction News, legislation is not necessary in his field to improve payments. The executive said in a conference call with analysts that, in the wake of Carillion, “we’re all competing for the very best supply chain, and one of the best ways to compete is to be one of the best payers. So, the market will make contractors pay quicker; it doesn’t need regulation.” The top 20 average days to pay in the construction industry has been 47 days, reports said.
Also in the U.K., the ripple effects are being felt through the retail supply chain. House of Fraser, the retail firm that said it needs to obtain funding by a week from today (Aug. 13), has been bought by Sports Direct. The waiting game has had an impact on some anxious suppliers, according to the BBC. If the 169-year-old department store company had gone into receivership (after C.banner abandoned a bid to buy a stake in the firm), then those suppliers may have gotten only a bit of what they are owed. The site noted that, to date, suppliers are being paid.
In one interview with BBC, Nigel Lugg — who serves as group executive chairman of Prominent Europe, which supplies Chester Barrie clothing to the struggling retailer — said that the supplier relationship proceeds apace. However, Lugg noted that his firm stands to gain only about five pence to the pound of what is owed. One anonymous supplier told the site that he had not known the state of the retail industry to be as bad as it is now. He said he sending only a single invoice at a time to House of Fraser, and was worried that the August payment might not arrive.
Still Too Much Paper
Looking beyond that individual firm’s troubles, indications come across the retail industry that payment terms are becoming more stringent. A survey conducted by WEX recently said that countries with relatively high experience with digital initiatives when it comes to payments have seen a lingering of manual payment processes – and, thus, late payments. As noted, 59 percent of payments in the United States are done across paper (check) conduits, but half of firms say they already have digital efforts in place as relate to account receivables. Info tech (IT) remains an impediment, as some executives said that suppliers had to embrace those initiatives as well.
“The survey findings support our belief that the ePayables industry and trend is showing no signs of deceleration, and new technologies are key to delivering faster, more secure payments and settlements to companies,” said Jay Dearborn, president of WEX Corporate Payments. The U.S. data pales in comparison with Asia, where 86 percent of companies have made electronic payments part of their operations.
In other company-specific news, this time in Australia, Xero has said it teamed up with GoCardless, with an integration that will help address late payments. The two firms said that businesses utilizing its solutions can accept direct debit transactions through GoCardless for Xero, and that the effort will help streamline payment times. The integration comes as Xero estimated that during this past April, firms with 30-day purchase terms waited an average of 36 days to be paid. The integration allows for an automated debit on a given, agreed-upon day, such as the invoice due date.
Time Is Money
Separately, a survey by Reliant Funding stated this past week that, according to the small business finance provider, customer spending ranks as a key challenge, external to operations. However, time becomes scarce as finding ample opportunities to put marketing strategies and other initiatives in the field proves elusive.