A new survey by payment specialist Payapps, an Autodesk company, found that 79% of subcontractors are almost always paid late.
The survey of 127 industry professionals in UK subcontractor firms also found that nearly three quarters (73%) of subcontractors experienced routine disputes over payment applications and processes.
Nearly eight in 10 (79%) put “variations not agreed” as a top-five cause of disputes, while 74% said that valuation differences and time-consuming back-and-forth over completed work are among the top five reasons.
Blacklisting employers
Payapps said the issue is starting to hurt contractors who withhold payments because subcontractors are starting to blacklist them.
Almost a third of respondents (29%) said they had avoided working for a contractor who had made it “too difficult” to get paid in the past.
84% of subcontractors said a contractor’s reputation influences their decision to bid for work with them. 68% have increased their rates or added risk margin because of slow or unreliable payments.
Payapps said contractors should take note, given the tight-knit community subcontractors work in, where news travels fast and skilled labour is scarce.
It means good payment practices are now a competitive advantage, Payapps said.
Admin avalanche
The survey also revealed that inconsistent instructions and confusion around payment application formats create an avalanche of admin for subcontractors’ finance teams.
More than half of subcontractors (55%) spend more than 20 hours a month on general admin, with applications for payment a particular thorn in their sides. Almost a quarter of those polled (24%) submit between 11 and 30 applications a month, with each taking an estimated 90 minutes.
Respondents said around a fifth (22%) of these applications often or always require corrections or additional information.
Subcontractors are often obliged to fit in application-for-payment work wherever possible (15%) or even process applications after hours (17%).
No reason to normalise delay
“These results are troubling, especially during such a tough time for the sector,” said Payapps’ Anthony Puma.
“Whilst margins are tighter than ever, there should be no reason to normalise delayed payments. The data proves that both parties are losing time and money to outdated, inconsistent processes, and much of that is down to subcontractors having to relearn a different process for every contractor they work with.
“It’s an unfair situation and needs to be tackled sooner rather than later, especially when the sector eventually picks up pace and project delivery spikes. We know from the research that greater consistency and transparency instils greater confidence in subcontractors when it comes to a contractor’s payment process. Standardising and digitising the application for payment process gives people their time back to do the work that matters and helps them rebuild their trust in contractors.”
Read more about the survey here.
