Construction companies have been amongst the hardest hit from the recent economic conditions, and more companies need to tackle their bad debt in order to get back on top. The construction industry has fallen at the fastest rate for two and a half years in the last month. Indeed, the importance of strengthening the construction industry is highlighted as its weak performance was one of the main reasons the UK economy fell back into recession this year.
Construction industries are also being worst affected by late payment problems, an issue that’s found across the SME sector in the UK. On average, construction companies are waiting the longest of any businesses, on average 32.4 days according to a trade credit insurer.
It’s hard for construction businesses to work themselves out of such a situation, as not only are they being pulled apart by cash flow issues but many construction projects are being shelved due to the current economic strife. As it is, it’s very much survival of the fittest and most profitable. Many experts are urging construction businesses to overhaul their credit procedures and internal credit processes in order to make sure they are financially fit and ready to bounce back.
Debt collection agencies are experiencing an increase in enquiries from the construction industry and associated trades trying to recover unpaid debts and overdue accounts. Many of these problems could have been avoided by reviewing internal credit procedures, as well as making simple streamlining changes to their invoicing process.
Many construction companies are also making use of invoice financing, such as factoring and invoice discounting. These methods of funding can help to ease cash flow problems by unlocking the capital tied up in unpaid invoices, letting businesses take some of the pressure away. While it’s always useful to review credit procedures and streamline invoicing, invoice finance is another avenue to look into.