[ Spotlight: Late payment ]


the line. Always check out the main contractor’s history and make sure that you examine their potential for insolvency, as well as the project’s viability. For example, if it involves constructing an office block in a town or city that already has an abundance of empty commercial space, alarms bells should start ringing.’ Of course, it’s in everyone’s best interests


to finish a project. However, if a subcontractor experiences late payment, they are entitled to suspend the whole of the works. A party who validly suspends work because of non-payment will, under the new provisions, also be entitled to reasonable costs and expenses arising from the suspension.


Course of action If payment is not forthcoming, help is at hand via the ECA Debt Recovery Service, something that in the 10 years since it first came into being has recovered more than £10m for ECA registered members. Available to all registered members, it is run for


the ECA by Effective Credit Collections, which will in the first instance issue a free of charge letter of demand. This gets the ball rolling and shows the other party that the issue is serious. The ECA can then start advising the member of their rights under the Late Payments of Commercial Debts (Interest) Act, which outlines rates of compensation and can be applied retrospectively up to six years. ‘The good news is that a significant number of cases are resolved after the letter is received,’ explains Bob Partridge, managing director of Effective Credit Collections. ‘However, if this doesn’t produce the desired result, further action will need to be taken. This could include making telephone collections, the preparation of further written communications and the commencement of formal legal collection procedures. Although any additional work has to be paid for, we offer to do it at a highly discounted rate.’ The ECA’s policy is to offer the most appropriate


advice that will lead to the best possible financial outcome in the shortest period of time. Although disputes of this nature can be messy, unpleasant and time-consuming, Partridge says: ‘We may not necessarily tell you what you would like to hear, but we will always tell you what you need to know.’


Final word Although effective credit control and prompt invoicing are just two of the ways to help reduce the likelihood of problems, the sad fact is that some companies will do all they can to avoid paying. There has to be a cut-off point and in this instance, rather than delaying taking action, ECA members should contact the ECA Debt Recovery Service or Effective Credit Collections as soon as they believe they have exhausted all other methods of securing payment.


We may not necessarily tell you what you would like to hear, but we will always tell you what you need to know


March 2013 ECA Today 57 Damage limitation


It is always advisable to put measures in place that reduce the likelihood of late or non-payment. While some of the following points might appear obvious, it is surprising how many companies fail to implement them.


nCollect information about the companies that you deal with. This includes searching any Companies House records and making notes about whom they do business with and any other projects they are working on.


nAgree terms of business. Never work on the basis of a ‘gentleman’s agreement’, and make sure that payment terms and conditions are agreed and documented before starting work. Provide a clear estimate and schedule of works, and if stage payments are agreed, then make sure that the consequences for breaching them are clearly and unambiguously stipulated.


nDon’t delay in submitting invoices. Doing so just offers the customer extra credit and can also give them the impression that you are a ‘soft touch’ when it comes to payment. Also, have a credit management strategy in place so that overdue invoice settlement is dealt with quickly and efficiently.


nDon’t be backwards in coming forwards. Asking for payment does not have to lead to confrontation and animosity. More often than not a firm but friendly approach will ensure that payment issues are taken seriously, so don’t be afraid to say what you mean and mean what you say.


nIf you have any long-term subcontracts, make sure they are regularly reviewed. If it is stipulated that all matters in dispute must be resolved via adjudication or arbitration, it could be difficult to recover the full amount owed via the county courts. Establish the date of issue of the Certificate of Making Good Defects and give the main contractor written notice three months, one month and one week before any payments are due.


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