It’s about time the industry embraced 30-day payment terms

During the first national lockdown, almost a year ago, we looked to our business partners for support in adapting to the dramatic changes we were going through as an industry. Very pleasingly, we found our suppliers more than willing to work with us to overcome issues presented by the coronavirus outbreak.

We, and others, were able to draw on a bank of goodwill developed over years of prompt payment to suppliers at a time when it mattered most. That is why the changes announced by the government this week to the Prompt Payment Code and payment terms represent an excellent step forward for the industry as a whole.

It may be difficult to police but I would hope that suppliers are able to vote with their feet

It is absolutely right that we should be make a fair margin for the work we do but it is not right to be holding on to payment for the sake of cashflow and leaving suppliers out of pocket. It is not only damaging for the supply chain, but also to the reputation of our industry.

To halve the small supplier payment terms to 30 days is the right move. We feel this will help drive efficiency across the industry and provide greater protection to the supply chain. It may be difficult to police but I would hope that suppliers are able to vote with their feet and simply do not work with those operators who continue to hold on to payment.

There are plenty of contractors that do adhere to the code and I hope in time the 30 days rule will be extended to all suppliers not just the smaller ones but what has been announced is an excellent first step.

As a business, it’s long been part of our ethos to commit to a maximum of 30-day payments, while striving for shorter times, because it is the right thing to do. My hope is that certainty of payment will help to attract more people into the construction industry, which in turn will help address the skills shortages in the UK construction industry.

The approach a business takes to paying its suppliers says much about their overall operation. In my view, being proactive, and paying on time generates far more goodwill and better relations with suppliers than the relatively small cashflow loss.

It is not just that it’s the right thing to do to pay our supply chain promptly but from a business and delivery perspective it also makes good sense. Developing long-term relationships with suppliers, which are based on mutual trust, is central to the prompt and faultless delivery of our projects.

The multi-faceted nature of the construction industry means that as a contractor you have to recognise your position sitting near the top of the supply chain tiers and that prompt payments assist many other suppliers in managing their businesses successfully. We cannot operate in isolation without consequences for the rest of the industry, upon which we all rely.

It’s better for your long-term pipeline of opportunities as well, if you’re able to deliver your projects in harmony with a committed and loyal supply chain. Shrewder customers are increasingly asking their contractors for evidence that they are paying their supply chain promptly. This in the long run, may be the greatest driver of prompt payment for all and subsequent long- term health of our industry,

Mark Beard is chairman of Beard and current president of CIOB