Editorial: Apathy reigns
contractjournal.com Newsletter: 21.07.05
Editorial: Apathy reigns
Three thousand of Benson's unsecured trade creditors failed to respond to the administrator's request for details of how much they are owed. News editor Justin Stanton argues that it's time the construction industry ended the reign of apathy towards late-paying customers.
The apathy of Benson's creditors who have failed to tell the administrator how much they are owed simply beggars belief.
The latest note from PricewaterhouseCoopers (PwC) highlights an estimated return to unsecured creditors of 10p in the pound – a brighter outcome than many had predicted.
Clearly a large proportion of the 3,000 creditors who have not come forward may have felt that there was little chance of any return, and so there was no point contacting PwC.
However, no matter how time-consuming it may be (and it shouldn't be if your accounts are up to scratch) to find out how much you're owed and inform the administrator of that figure, it must be worth it.
In an industry as cut-throat as construction where a margin of just 3% is the target, surely any sum recovered from a debtor is worth the time spent on the paperwork?
This situation highlights once again the wider issue of the financial insecurity that is endemic in construction.
Every month the construction trade press reports yet another contractor collapsing, owing millions to its supply chain. What's more shocking: the fact that well-established firms have 'fatal' financial problems or that the firms in their supply chains allow them to run up huge debts?
Is it simply a question of poor cashflow and financial mismanagement or an unavoidable result of an adversarial industry where you don't get paid until the work is done?
One of the frequent answers mooted to this conundrum is: "They're a long-standing client for whom we do a lot of work – and we don't want to lose that work in the future by being really tough on their credit."
Those who think that way must then ask themselves the following question: is a persistently late-paying customer good for business?
The evidence in construction suggests not.
Credit checks and financial health updates should be carried out for all firms you trade with – including those you've been trading with for years. Try our Instant Credit Check service provided by Armadillo on www.contractjournal.com.