Build UK has published its latest round of invoice payment performance data, which shows that despite improvements in some areas, prompt payment remains an issue for many market-leading businesses in the construction industry.
The Build UK data is compiled from information provided under the Government's Duty to Report on Payment Practices and Performance scheme, and includes main and specialist contractors, housebuilders, clients and professional service providers.
The data reveals that 49 of the 123 businesses on the list (40%) were late paying at least 20% of their invoices with some failing to pay as much as 74% of invoices within the agreed terms. The data also shows that some of the poorest performing businesses have an average time taken to pay that is more than 70 days and that there are 11 on the list – nearly 10% of the total – that have an average of over 60 days.
However, there were also positive findings from the latest report. Overall, tier one contractors have reduced the average time to pay invoices from 45 to 30 days since the first time the data was compiled in 2018. On average, these contractors now pay 83% of invoices within the agreed terms – up from 63% five years ago – and 95% of invoices are paid within 60 days. Since April 2022, the Government has required businesses bidding on major public contracts (above £5 million) to be able to prove that 95% of invoices are paid within 60 days.
What causes late payment?
While the precise issues and challenges faced by each business in terms of payment will be different, there are several factors that often cause delays in paying invoices. It may be as simple as the invoice being missed, accidently deleted or sent to the wrong person within the organisation. Also, the invoice may not contain a purchase order (PO) number when it is submitted, or there could have been a mistake when the information was keyed in. These issues may not be identified immediately, resulting in a delay in solving the problem or requesting resubmission from the supplier. This in turn means that invoices can quickly become overdue and when this occurs frequently across all invoices the proportion that are late can rise sharply.
How to solve these issues
An effective way to improve payment speed is investing in a true e-invoicing system such as Causeway Tradex. This allows the manual processing of paper to be minimised, if not eliminated, on both sides of the payment process as well as preventing errors and lost invoices. This is an approach that has been adopted by many of the best performing businesses on Build UK’s list.
For example, the data shows that Causeway Tradex user Galliford Try pays 89% of its invoices within the agreed terms and 99% within 60 days, with invoices paid on average in 26 days. Similarly, Morgan Sindall has been using Causeway Tradex for over 20 years and in the latest report it was shown to pay 99% of its invoices within 60 days and on average pays within just 24 days.
With Causeway Tradex, all suppliers submit their invoices through a dedicated portal. All invoices then undergo an automated validation process to ensure each is an HMRC-compliant invoice, check it is not a duplicate and confirm it contains a valid PO number and that the details match the PO information. This means only invoices that are ready to be paid are delivered to the accounts payable team, improving straight-through processing rates.
For invoices that do not meet the requirements, the supplier is automatically notified and given the reason for the return. At this point they are given the option to edit and resubmit, removing the need to credit and re-issue. This automated validation, only possible with a true e-invoicing solution, immediately delivers up to an 80% time saving for the accounts payable team and significantly improves productivity.
The Build UK data highlights that, despite significant improvement in recent years, there is still more that needs to be done to improve invoice payment rates. As a true e-invoicing system Causeway Tradex can help improve processing and eliminate many of the issues that lead to payment delays.
To find out more and see how Causeway Tradex can help, visit our prompt payment content hub.