Everyone wants to be paid on time, but the construction industry has features that make prompt payment challenging.
Causeway’s Tradex software for e-invoicing helps remove inefficiencies in payments in an industry where a large volume of transactions are still reliant on paper.
Rob Ramsay, Causeway's Head of Centre of Excellence, says: “We are a backward industry in many ways in terms of how payments and invoicing come together, and Causeway’s product attempts to remove those inefficiencies, or at the very least, improve them for both contractor and supplier.
“It’s about digitising the order-to-payment process. The principle is to remove inefficiency, because there are a number of key challenges that the construction sector faces in moving items from an order through to invoice and ultimately to payment.”
Impediments include the fractured nature of construction supply chains, the wide geographical distribution of projects, the number of suppliers that can be involved in any given project and the huge variety of products procured.
All this has slowed the industry’s adoption of fully digitised order-to-payment systems that are commonplace in other sectors.
Ramsay says payment systems usually involve procurement, finance and operations, made up of individual teams with different priorities, so it’s a challenge to make the overall process a priority on its own. “There has to be a cross-organisation drive in terms of how people contribute,” he says.
Users of Causeway’s Tradex typically see a return on investment within three to six months from implementation, says Ramsay.
It uses automated processes “in the background” that do not require a great deal of staff training when setting up. “What is more important is engagement with your supply chain,” he says. “Suppliers have to start engaging with you on our platform and sending invoices electronically, so they can be processed electronically.
“The benefit to the supplier is quicker turnaround on those. And they will be kept aware of what’s happening to their invoices.”
Ramsay says one of the principal drivers for moving companies towards digitalisation is the government’s Prompt Payment Code, which aims for 95 per cent of undisputed and valid invoices from SMEs to be paid within 55 days from 1 April 2024 and within 45 days from 1 April 2025.
Ramsay says: “The UK government has indicated a tightening of the process, and firms that do not meet the standards for making payments may be blocked from participating in contracts across central government, local authorities, and other government bodies.”
He concludes: “You need automation to transfer invoices and supporting documents, then match invoicing to goods receipts and to purchase orders, otherwise you have an army of people in the back-office managing the process.
“When we talk about digitalisation, these are the elements that Causeway brings together to reduce the inefficiency in the process.”
Firms connected to Causeway’s system also benefit from the potential to be linked to Tradex’s entire trading ‘community’, after they connect to any one firm.
“We can very quickly extend people’s connections within the community; if you trade within
a traditional supply chain in the UK, then 60 per cent of that construction supply chain is typically already connected in Causeway Tradex,” Ramsay says.
To discover more about prompt payment, download your guide to achieving 45-day payments by 2025.
This article was written in conjunction with Construction News
