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Treat a slipping payment date as a warning, not an inconvenience

A main contractor heading for trouble rarely says so, but later payments and other small signs usually show on your own job weeks before it fails. Keep a short watchlist, read it every month, and check the public record when two signs appear together.

Updated: . By Jack Butler-Kettle, Construction Claims Consultant.

Why it matters

The signs usually show in your own account and on your own site weeks before they show anywhere public. Each sign on its own has an innocent explanation. A late payment is put down to the accounts team, and a request to hold an invoice to the year end. So the signs get noticed but not acted on. Read together and in order, they tell a different story. A watchlist shows the pattern, and a rule for when two signs appear turns worry into a decision.

How to do it

  1. Record the date each payment actually arrives against its final date for payment. A drift of a few days a month then shows as a trend.
  2. Keep a short list of signs: requests to hold invoices or accept part payment, Pay Less Notices without reasons, other trades leaving, site staff leaving, suppliers refusing credit.
  3. When two signs appear together, check the public record. Look at Companies House for overdue accounts, new charges over its assets and director changes, and at The Gazette for a winding-up petition.
  4. Write down what you decide: carry on, slow deliveries, apply early or prepare a suspension notice.

Example

Illustrative example. The scenario and figures are invented.

The facts

A roofing subcontractor's payments from one main contractor arrive 4, 9 and then 15 days after the final date for payment. Then the main contractor's quantity surveyor asks it to hold its April invoice until May.

What happens

  1. The watchlist shows two signs together, so the commercial manager checks the public record that week.
  2. Companies House shows the main contractor's accounts are overdue and a new charge has been registered over its assets.
  3. The director decides to deliver only what can be fixed within a week, and to prepare a suspension notice for the next missed date.

The outcome

The main contractor enters administration 6 weeks later. The subcontractor is owed £23,000 rather than the £70,000 it would have been owed at its usual pace of deliveries and applications.

To have this set up for you, see our Insolvency Loss Prevention service.