By Colin Darch, business process consultant at OPEN ECX
BLAME culture is a contentious topic in the construction industry, particularly when it comes to invoicing and payment.
With subcontractors blaming contractors for late payments and contractors placing the fault on subcontractors, UK blame culture is an unproductive cycle which threatens healthy business operation. With this in mind, how can online payment management portals combat blame culture to offer better visibility and traceability across the supply chain?
Why relationships matter
Specifically in terms of the construction industry, studies have indicated the mutual benefits of sustaining a positive working relationship between contractors and subcontractors, particularly the impact on a project’s overall success.
By way of comparison, negative relations between contractor and subcontractor can have a disastrous effect on a build, potentially jeopardising productivity, quality and completion times. For instance, on a large commercial project a single contractor can be working with up to 20 subcontractors, possibly more. For the contractor, there is a huge amount of responsibility on their shoulders to manage their subcontractors efficiently and to deliver what was outlined to them in the subcontractors’ contracts, particularly in terms of payment.
The rise of a blame-game culture
In some cases, a contractor might make a simple error, mistakenly delaying payment by a few days or so because they are swamped with so much work. The real concern, however, is if a contractor is intentionally delaying payments to subcontractors. In these cases, a contractor might shift the blame on a variety of things, including subcontractors sending invoices late or admin errors.
However, if in the same case the subcontractor habitually sends invoices late whilst claiming not to, thus blaming the error on the contractor for not paying him on time, this causes a negative blame cycle, ruining business productivity and a project’s build for the both.
Wherever risk materialises, blame is likely to ensue. We are all human and can all fear an issue’s negative repercussions. But surely it is better to find a solution which prevents these risks from emerging, so that no party can pass uncorroborated blame onto the other?
What is the solution?
The real issue here is the lack of traceability, accountability and transparency inherent in conventional, manual invoicing systems. To cover all bases, it is crucial to switch to a more rigorous system which keeps contractors’ and subcontractors’ payment systems above board.
A potential answer is to digitise all payment and invoice processes so contractors pay their subcontractors in a timely fashion whilst maintaining a healthy, risk-free environment for themselves.
Designed for medium to large contractors, systems such as Open ECX’s WebContractor manage the subcontractor applications for payment process, as well as other subcontractor concerns; insurances and bonds, self-billing invoices, authenticated VAT receipts, minor works and work order instructions for example.
Moreover, sending and receiving invoices electronically is one of the safest, most efficient ways to combat late payments. Offering companies numerous strategic benefits including: faster payment times and enhanced visibility, e-invoicing is a great solution for buyers, suppliers and managers. E-invoicing improves accuracy and cash flow across the supply chain, ensuring companies manage their payment processes effectively.
A huge issue across sectors, especially the construction industry, blame culture has strong potential to breed unfriendliness and even contempt between subcontractor and contractor. As digitised systems offer complete traceability and transparency, subcontractors can track their payment applications, and contractors can manage these applications all in one place. Should intentional delays occur, then relevant parties are held accountable for their actions.
But overall, these solutions ensure healthy relationships between contractor and their subcontractors. Considering this relationship is a huge contributor to the success of projects, it is high time better measures were adopted to preserve this integral bond.
