Five people managing 210 subcontractors with pen and paper and a spreadsheet: this is the picture painted of the average contractor’s approach to financial control and subcontractor payments in a new report from Payapps.
The report surveyed more than 160 construction professionals in the UK and the Republic of Ireland. Half of them (50%) still use spreadsheets to manage subcontractor payments, while nearly as many (46%) depend on email. More than a quarter (27%) still use pen and paper.
The Payapps survey also found that each week, contractor finance teams spend around 20 hours on payment applications, 18 hours managing self-billing arrangements, 18 hours fielding payment enquiries and 17 hours on subcontractor insurance administration. Nearly two-thirds of respondents (60%) were concerned about the amount of time their teams spend on subcontractor application administration.
Only a fifth have full visibility of applications for payment before they are approved, while more than a fifth (22%) report little or no visibility at all. “In a sector where cashflow can make or break a project, that is a significant exposure,” Payapps said.
Difficult to report payment practices
Almost a third (31%) of all respondents said their current processes/systems do not make it easy to produce accurate reporting on subcontractor payment practices. Meanwhile, more than half (54%) of UK respondents were concerned about their ability to comply with Reporting on Payment Practices and Performance Regulations.
However, on a more positive note, the vast majority (81%) are using some form of financial control software. Indeed, nearly half (44%) use finance software specific to construction. Among the latter, the vast majority say accurate reporting is straightforward; only slightly more than half on legacy tools say the same. Software users are also more likely to treat profit margins and ESG as genuine strategic priorities, rather than things to get to when time allows.
Neal Hooks, head of Payapps UK & IE, says: “Five people managing 210 subcontractors, with pen and paper and a spreadsheet, is an acute structural problem and what this research highlights is that whilst the ambition to pay fairly is real, the tools haven’t kept up pace.
“Even more concerning, when 71% of organisations are signed up to the Fair Payment Code and not one of them would actually pass it, that should be a wake-up call. It highlights that something is systematically broken and needs resolution, fast. The good news is that a large number of contractors already using the right technology are having a materially different experience, and the rest of the industry is starting to catch on.”
