Our top tips for getting paid on construction projects

The construction industry has something of a bad reputation when it comes to managing cashflow. Earlier this year, research found that half of all invoices were paid late.

In some cases, those invoices are never paid at all. Nobody can guarantee one party will pay another party. Even the projects which start on the very best foot, sometimes go south when it comes to payment.

However, in our time helping construction companies secure payment, there are several issues we see time and time again.

Prevention is always better than the cure. Getting things right at the outset should mean that if there is a payment issue, you are best placed to get an adjudication decision in your favour.

So, on that note, we thought we’d share with you some of our top tips for making sure you get paid:

Follow the contract

This may seem obvious, but it’s surprising how quickly the contract is forgotten once the project starts and the project team become too busy!

Whatever your contract says about payment, follow it. Parties often worry that relationships can be damaged by following the contractual processes. But they may be far more damaged by a payment dispute.

It is likely that your contract will contain payment provisions. These will set out when and how you should submit applications for payment. Make sure you are following those provisions to the letter of the contract.

We have, on occasion, seen successful adjudications where sums have been awarded when parties have not strictly followed the contract. But do you want to add this element of risk and the potential for an adjudication? Clarity should ensure that such a scenario doesn’t arise in the first place.

Set out a clear application for payment

Applications for payment often suffer from poor presentation. Pay attention to the detail, and you’ll be less likely to encounter problems.

Firstly, use the same language as in your contract. So, if your contract refers to ‘Interim Payment Application’ make sure that is written clearly across the top of the page. That way there can be no ambiguity.

Payment applications should make it clear that is a demand for money owed. State the contract value for the entire contract. Then make sure the application for payment is cumulative and deduct the previous amount that has been paid.

Submit your application on time

Follow the application for payment dates within the contract if known. Similarly, dates by which those applications must receive a response. It can be helpful to set up a calendar or diarise the necessary dates to ensure you don’t miss them.

Failure to submit applications on time might mean that your payment has not become due. If your contract is not clear when a payment becomes due or when is the final date for payment then legally the Housing Grants, Construction and Regeneration Act 1996 as amended (“Act”) steps in to ensure you have a suitable mechanism.

Provide back up

There is a reason we repeatedly emphasise the importance of not only records but good records. Provide evidence to support your application for payment. This might include instructions, a schedule of rates, quotes, an explanation of any variations, photographs, receipts, and supplier invoices.

If you are not able to provide all the supporting records, at the very least, provide a detailed commentary on why you are claiming the figures submitted. If doing so, try to keep language plain and clear. Stick to the facts and try not to overcomplicate things.

Refrain from issuing invoices

Unless the contract strictly requires invoices to be issued for payment, avoid issuing invoices. All too often invoices show only the net amount claimed rather than a cumulative sum less previous paid or due to be paid. As always, clarity is key. If a dispute arises, it’s crucial that you have been clear about what you have requested to be paid and what has already been paid.

If you follow these steps, you should be far more likely to receive payment for the work you’ve completed. However, if you find yourself struggling to get paid, get in touch with one of our team to see how we can support you.