Our construction debt collection inquiries spiked between October to early December.
This has caused us to reflect on the most common failings in debt collection by construction businesses in 2014. Here they are.
The third most common failing was… failing to give a payment schedule under the Building and Construction Industry Payments Act (“BCIPA”) within 10 business days of receiving a properly given payment claim.
You must give a payment schedule stating the amount (if any) you will pay and the reasons why you should not have to pay the full amount claimed. Otherwise you may have no effective right to defend a summary judgement application!
The second most common failing was… issuing invoices without a “reference date” under the BCIPA or the construction contract. An invoice is not a payment claim unless (amongst other things) it is issued from a “reference date”. The reference date may be stated under the construction contract, usually the payment stages. Otherwise, BCIPA states that the reference date is the last day of each month.
Beware issuing multiple invoices in a month, as only one may qualify as a payment claim! The most common failing was… giving invoices only by email.
An invoice is usually not a payment claim unless (amongst other things) it is given to the debtor by a method permitted by the construction contract or by BCIPA. Many construction contracts do not recognise delivery by email. Neither does BCIPA. Play it safe and also send your payment claim by a second method, such as by post.
Everyone connected with the construction industry knows that cash flow has to be managed closely, especially at this time of year.
Construction business owners that want to improve cash flow will make it a priority in early 2015 to align their invoicing systems with BCIPA. Call us and we can show you how. We can also meet with your accounts manager or accounts team and train them, so you have peace of mind that your accounts department is effectively managing your accounts receivable and payable.