Sole traders and subcontractors working in the construction industry often rely on accurate and timely payments to cover critical expenditure, such as wages or materials. It is therefore no surprise that an IronmongeryDirect survey in 2022 revealed finances were the principal cause of stress for 34% of those working in construction. While spreadsheets have been the most common way of submitting and recording application for payment data, technology has a crucial role to play in saving cost and administration time while reducing risk and ensuring faster and more accurate payments.
Payapps identifies the mental health impacts of delayed payments, before assessing the importance of using technology to streamline the application for payment process and, ultimately, boost mental health and wellbeing.
With contractors and subcontractors under increasing pressure to complete projects on time and to budget, especially with the industry seeing project significant delays due to the Building Safety Regulator, mental health has become a major talking-point across the built environment.
This is exacerbated by the fact that UK businesses are experiencing a substantial level of late payments compared to other countries. Indeed, a survey by trade credit insurance and business information provider Coface revealed around 90% of UK companies experienced late payments between November 2024 and October 2024. Worryingly, 44% of those surveyed stated delays had been more frequent than before.
When you consider the mental, and financial, impacts that late or missed payments can have on contractors, subcontractors and business owners across the construction industry, identifying ways of reducing the risk of delays, streamlining processes and giving construction professionals full accessibility and visibility of the payment related data they need, when they need it, shouldn’t just be a consideration but a necessity.
Late payments can cause significant anxiety and stress
For sole traders and subcontractors, accurate and timely payments from contractors are crucial, enabling them to cover their expenditure on wages, materials, rent, utilities and mortgages.
Conversely, when payments are delayed or missed entirely, it can be a real challenge for them to manage cashflow and forecast effectively.
While adjudications and disputes can sometimes see a resolution, the uncertainty of when subcontractors are going to receive income can create regular stress and mental pressure. In an already competitive and difficult sector, this can be particularly problematic.
Reduced confidence of small business owners
While late payments are understandably a problem for larger organisations, the impact they can have on small business owners cannot be understated. For example, they will be less likely to work with new contractors or take on new projects as a result of heightened disputes or uncertain payment terms.
Similarly, they may choose to avoid growing their business due to hesitation over the viability of a specific project or doubts over whether they can risk their resources.
It’s important to note that while subcontractors will be the most likely to be impacted by payment delays and disputes, any contractors and those managing project finances could see their mental health affected by the application for payment process.
Finding the right balance
Given the construction industry’s competitive nature, maintaining business relationships is essential. Consequently, many subcontractors can be hesitant to chase payments for fear of negatively impacting their working relationship with the contractor.
If they’re too assertive, they could risk the attainment of future work. Alternatively, if they remain silent when it comes to payments, there is a concern they could be regularly exploited.
On top of that, adjudications, legal action and disputes over payment terms can be emotionally draining, as well as expensive. It’s imperative, therefore, that anyone dealing with applications for payment successfully and carefully finds the right balance between not being bold enough and being too forceful when chasing or requesting payment.
The stress of trying to ensure regulatory compliance
With the UK Construction Act mandating that subcontractors and supply chains are paid fairly and on time, not to mention the Fair Payment Code increasing financial transparency, contractors can often face incredibly tight payment deadlines.
The UK Construction Act in particular dictates a stringent application for payment process, including the setting of payment dates and issuing of payment notices. Consequently, subcontractors and contractors must submit accurate and timely applications, while main contractors or clients must issue payment notices within strict deadlines. While undoubtedly a positive step forward for the construction industry, especially in regard to increased accountability and transparency and the minimisation of missed deadlines, demands and challenges for contractors will likely increase.
Relieving stress and enhancing peace of mind through technology
Over the years, professionals across the built environment have typically used emails and spreadsheets to submit, review and record application for payment data. However, as many have discovered, this manual form of administration can often lead to inaccurate calculations and errors, causing payment and project delays.
Furthermore, spreadsheets are rarely the focus of meticulous checks so errors of under- or over-value aren’t particularly obvious. Consequently, this can mean valuations and payments can be worked out incorrectly, leading to project delays, over- or under-spend, and fractious relationships.
With contractors and subcontractors not only concerned with improving financial transparency but also the mental health and wellbeing impacts of late payments, many are now turning to technology to provide the solution.
Cloud-based software, such as Payapps, streamlines the application for payment process, reducing the administrative burden, costs and risk while increasing accuracy. Indeed, by simplifying application for payment submission and enhancing status transparency, payment management software can substantially reduce stress for subcontractors needing to accurately control and forecast cashflow.
This enhanced accuracy and reduced potential for payment delays and disputes also means projects will more likely be completed within budget and on time – significantly reducing the pressures on contractors and subcontractors.
Tracking and having greater control over variations, which applications need to be paid and which ones are still to be certified, also provides financial teams with the additional peace of mind that all vital information is being regularly monitored and checked. Consequently, there is an increased chance of regulatory compliance being achieved.
Reducing stress and mental anguish by leveraging technology that fast-tracks payment applications and removes ambiguity is becoming increasingly important in an industry that often sees people lacking the courage to seek help or speak openly about concerns. While this will undoubtedly help the individual, the wider industry will also benefit from more professionals using technology in this way, with faster and fairer payments, fewer disputes, and a more streamlined – and productive – built environment for all.
