According to new research from Payapps, on average, contractors only have five people in the Finance function managing 210 subcontractors. That’s the reality facing the average UK construction finance team right now.
It is only the beginning of the problem, which is covered in detail in Construction Finance: Why Technology Is Critical, a report drawing on a Censuswide survey of 162 senior UK and Irish finance professionals.
Painting a bleak picture of financial strain in the sector, the whitepaper uncovers how those five team members are being crushed under the weight of excessive admin.
Each week they spend around 20 hours on payment applications, 18 hours managing self-billing arrangements, 18 hours fielding payment enquiries and 17 hours on subcontractor insurance admin. That is the better part of a full working week, eaten up by tasks that purpose-built technology would largely automate. What gets left over for thinking about financial strategy or risk management is minimal.
The tools most teams rely on actually make things worse. Half of organisations (50%) still use spreadsheets to manage subcontractor payments. Nearly as many (46%) depend on email. More than one in four (27%) still use pen and paper. These are not the habits of a few old-fashioned outliers. The survey shows they are standard practice.
Visibility and Compliance
The knock-on effects are serious. Only one in five organisations (20%) has full visibility over applications for payment before they are approved, whilst more than a fifth (22%) reports little or no visibility at all. In a sector where cashflow can make or break a project, that is a significant exposure.
Compliance anxiety runs through the findings, emphasised by almost two-thirds (62%) of respondents who are concerned about incorrect VAT or CIS treatment. More than half (54%) worry about the accuracy of their Duty to Report submissions and 64% are anxious about the cost of smash and grab adjudications, with good reason: organisations face, on average, seven adjudications over three years, at a combined legal cost of £2.1 million.
The Prompt Payment Paradox
The sharpest finding in the report is also the most uncomfortable. Almost all respondents (98%) say paying subcontractors on time is a priority. Nearly three quarters (71%) of UK respondents are signatories to the Fair Payment Code.
Yet not one of the organisations surveyed would qualify for Gold, Silver or Bronze status under that same Code, with only 15% pay more than half of their invoices within 30 days. It makes it painfully clear that whilst the framework for improvement exists, the ability to achieve it is lacking.
What Technology Changes
The data on technology is persuasive. Among organisations using dedicated payment software, 88% say accurate reporting is straightforward. Among those still on legacy tools, only 52% say the same. Software users are also more likely to treat profit margins and ESG as genuine strategic priorities, rather than things to get to when time allows.
The industry can see the direction. Nine in ten respondents (91%) believe technology is important for construction processes. Four in five (81%) say dedicated payment software would increase their efficiency. Among organisations not yet using it, 63% plan to adopt within six months.
Neal Hooks, Head of Payapps UK & IE, says: “Five people managing 210 subcontractors, with pen and paper and a spreadsheet is an acute structural problem and what this research highlights is that whilst the ambition to pay fairly is real, the tools haven’t kept up pace.
“Even more concerning, when 71% of organisations are signed up to the Fair Payment Code and not one of them would actually pass it, that should be a wake-up call. It highlights that something is systematically broken and needs resolution, fast. The good news is that a large number of contractors already using the right technology are having a materially different experience, and the rest of the industry is starting to catch on.”
Download the Full Report
The findings above represent a fraction of what the full Payapps report covers. For the complete picture, including the practical steps organisations are taking to close the gap,
Download Construction Finance: Why Technology Is Critical here.
