Helping you navigate the construction cash flow challenge

cash flow
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Late payments are one of the biggest challenges facing construction SMEs. Aldermore Bank sets out some of the steps you can take to protect your cash flow and stay ahead of the game

A thriving construction industry is crucial to the wellbeing of the UK economy – if we can’t deliver the building projects and infrastructure our country needs then our future economic health is at stake.

Confidence in the sector was hit this past year by the uncertainties of our future trading relationships with Europe and even the vagaries of the weather, from the sub-zero temperatures of the Beast from the East to the subtropical heat of the long summer of 2018.

But the greatest challenge, whatever the economic weather, is cashflow – not getting paid is one of the biggest threats facing SMEs. According to the National Federation of Builders, construction SMEs are owed £30bn in unpaid invoices – with the industry having the worst payment record of any industrial sector. f

While we may not know exactly what the future holds, at Aldermore we believe that taking steps to manage your cash flow is something every construction business can do.

Andrew Dixon, Commercial Director – Specialist Finance at Aldermore, said: “While it is impossible to predict exactly what issues can beset a project, there are some safeguards you can put in place before and after you sign contracts, which can help protect your business from the risks posed by late payments and help you stay ahead of the game.”

Here are five construction finance measures we recommend:

  1. Get organised

Examine every payment you make and check for any imbalances where you might be paying bills before you need to, or not receiving payments when you need them.

  1. Prompt and accurate billing

Ensure you understand the procedural elements of your contracts and the timings of the billing process. Reduce potential payment delays by including all the billing information the customer requires along with an accurate value of which bill you are expecting to be paid.

  1. Be aware of how delays can affect your costs

Factoring in the possibility of delays, and agreeing a solution with your customer, will protect you if your project falls behind schedule, or your work is held up by a contractor scheduled in front of you. Keep talking with your customer about the impact of the delays on your timings and cash flow.

  1. Release value tied up in unpaid billing

Businesses may struggle to pay suppliers and purchase materials despite plenty of forward planning. A finance solution such as Aldermore Construction Finance may offer some relief by helping to unlock the capital tied up in unpaid billing.

  1. Try to sense when things are about to go awry

Regularly check progress against your project plan, so you can spot any minor issues before they become major ones. Initiate weekly project updates with all your sub-contractors to discuss progress against agreed milestones.

Aldermore’s Construction Finance provides you with a safety net for your finances, so you don’t have to rely on payment from your customer before you can make staff and supplier payments, or take on new projects. Our experts use their thorough construction industry knowledge to give you the most informed advice and help identify any potential issues with contracts before they arise.

Contact the Aldermore Construction Finance team on: 0333 999 3378 and download our free guide 5 Steps to Construction Success.

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Aldermore Specialist Finance

Tel: 0333 999 3378

Twitter: @AldermoreBank


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