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How to build a solid credit control foundation in the Construction Industry

Late payments have massively impacted the construction industry. Many customers often rely on using credit to utilise construction services and that can lead to delays in payment, or in some cases, no payment at all.

Giving credit is a routine practice in construction. Companies are both extending credit as well as borrowing credit from other suppliers. This heavy reliance on this practice often creates complications. The system is filled with cracks where payments can easily fall through. The lower down in the construction project chain you are, the higher the chance there is of some contractors abusing the payment system.

Overdue invoices aren’t just an inconvenience, they can have a major effect on your cash flow and stunt any potential business growth.

The best way to keep cash flow issues at bay is to always be prepared.

Risks to a business’s cash flow can arise at any time and having a credit control procedure is essential to any business. You'll know exactly what to do next if a debtor defaults on a payment for example. Once you know what the next steps are, it will quicken the recovery back to a healthy flow of cash.

Here are some CTCC Tips to lay a solid foundation for effective credit control and application management in the construction industry.

  • Negotiate payment terms. You should set terms at the start of the contract and there is nothing to stop you from discussing changing this. Payment terms in the construction sector are historically notorious for being long. Negotiating on shorter payment terms could be the difference between being paid a month (or two!) earlier.

  • Know your application due date. Most main contractors provide an application/payment schedule within their contract. If you don’t send your application in by the due date, that’s it. You’ll have to wait until next month’s application date. This stop of cash flow could mean materials can’t be bought or even go as far as being unable to pay subcontractors. This is why it’s vital to keep track of application dates and send them in on time.

  • Note down any of the onsite variations. It’s bound to happen in construction. Customers might want some extra additions to what was agreed on, or something unforeseen comes up. Making sure that you keep a track of these for the next application will mean that extra materials and labour costs will be covered.

  • Maintain regular practice of credit control. It’s important for overall cash flow health. You can do this by invoicing promptly, keep tabs of when invoices will be due, and contact consistent late payers before invoices are due.

  • Know your customer’s payment practices. Construction is an industry with a spectrum of businesses. Many will have their own payment practices from paying by cheque to having set dates for pay runs. If you can learn their pattern of payment, you will be able to easily spot if invoices are being paid later than usual.

  • Make it easy for customers to pay. If there’s very few obstacles in front of your customers, they’ll be more likely to pay. Utilise online payments to get paid faster if this is options.

  • Contact late payers promptly. Reducing wait time between when your customer should have paid and when they will pay can ensure that money will be with you a lot sooner. Chasing your customers early can also make you aware of any queries they may have which can be easily sorted e.g. needing copy invoices.

  • You don’t have to give credit. Although it’s a common practice in construction, you don’t have to give credit to customers. By receiving payment upfront, not only will you make sure that customers who are constantly late payers actually do pay, your business will also get an injection of cash.

  • Chase for your retention payment. We understand. When at the end of a lengthy construction project, having to then chase for the last remainder of what you’re owed can seem futile, especially if the quantity surveyor has moved on to the next project and it’s been 6 months or even a year since the project completion. However, this is still money owed! A few phone calls could be the difference between getting paid the remaining 5% or 10% of what you’ve received.

  • Most importantly, maintain those relationships. Much of construction relies on word-of-mouth. Remaining positive when customers may be difficult can help sustain those all-important customer relationships which will ultimately help you grow.

Upholding good credit control practices is imperative for a business. However, it can be a lot of work to maintain. If this all sounds a little overwhelming, we understand. Much of these steps can get lost in the day-to-day running’s within the construction trade. Sometimes you might not know when invoices have become due, or when a statement run should have been done. This is where CTCC Solutions comes in. We’re an outsourced credit control company that can guide you through the credit control process and get those invoices paid.

If you’re interested, please drop us an email at We’d love to hear from you.


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