Alex Rawlings, PA and Marketing Lead at Credit Control Management Services, talks about how construction businesses can take control of their finances when working in complicated supply chains. 

Please note: This post was originally provided by the team at I-Construct.

Interview conducted by Sian Dowell and provided to CCMS.

Tell us about your business.

Credit Control Management Services (or CCMS) provides debt collection and credit control support and advice for SMEs across the UK, but primarily in Essex, Kent and Suffolk. Craig, the Owner, has been in the sector for over 20 years and has particular experience within the construction industry.

The services we provide range from full service credit control, so being your credit control team that manages everything top to bottom every month, right the way down to things that are simple like credit checks, which we do for £20.

It’s the part-time credit control or functions that you’re struggling with, we would manage that. We assess processes, terms and contracts. For example your credit control processes might be faulty, like you chase once to get a paid invoice, but it’s manual by email. You should put a rigid payment schedule in place and then have the right documentation to follow that up as well so that things are happening. Obviously small businesses generally tend to have relationship-based customers and they’ll follow them up as and when, so it’s about getting some rigid terms in place.

We would do trace for debt, so trying to track down people that owe you. We do straightforward debt collection. Big or small, doesn’t matter what size the debt is, that’s always based on no-win-no-fee because Craig has a really good return rate because he has such experience and he’s got a very nice manner. Basically if you’re owed £1,000, he’ll put just 10% on the top of that, but it’s the person that owes the money that has to pay that. There’s no risk to the business then.

We’re doing offerings those at the moment. And this is to support small businesses in particular, who are trying to keep work going over this very difficult period economically; they don’t want to take any risks, but they’re worried about spending lots of money.

We are mostly B2B, and again, specifically for construction, it’s about needing to get the cash flow back into your bank. So our strap line is ‘keep the cash flowing’. Get it into the bank, lock down your financial position, and then build in quick and often very simple steps to keep yourself solvent and stable to grow.

Craig is so engaged in the construction industry because he has a lot of friends personally that work in the industry because of the years he’s worked in it. When I was speaking to Craig when we were talking about construction and wanting to build something just for them, it’s not that they require something different, it’s that they require it with a different approach due to how supply chains and payment terms work.

There’s a big issue happening, particularly in construction, for payments through the supply chain. Is this something you can help business to unpick?

Craig has seen an uptick in construction businesses of micros and SMEs that just aren’t getting paid.

The immediate challenge is ‘let’s get that money back through your door’. Let’s get the cash back into the business so it’s healthy, and then let’s look at your processes after that. If the problem is that you don’t have the capacity in-house, then you can come in every month and just double check that things are being done, so you don’t even have to worry.

You can get your reports, understand your cash flow position, understand your POI, how strong you are and are able to apply for the bigger projects while waiting for invoices to be paid. Because if the small businesses within the chain of construction carry all of the risk, it’s their people, it’s their money buying the materials and equipment, the goods or the suppliers to get the job completed. And if they can’t get paid for the previous job, they can’t necessarily function for the next.

Just chasing contract after contract after contract, you might be very busy, but you might not be earning anything and you might not be able to expand. You need to find the right premises in order to meet those project needs, or engage with other suppliers for which you need to buy the works from, because you don’t have enough in the bank. Everyone should be running credit checks.

A typical business might have worked with a client for £10K and that client has disappeared because they don’t want to pay, or they’re trying to stretch their terms. What’s happening in the construction industry is that people work with people in a chain and so you’ve got person A, person B and person C to consider. Person B is owed money by C, but actually they’ve worked with that business for years and it’s not the fact that they can’t get the money out them, it’s the fact that person C cannot pay because they are also owed money and waiting for invoices to be paid by their clients.

This problem isn’t going to be sold by just chasing down money and getting it in the bank. What that might mean is that the business that you’ve had a relationship with for 20 years becomes to turn sour. You might lose work because of that cause of recommendations. I think that a lot of businesses are struggling to push particularly hard because they understand that everyone’s in the same boat at different levels.

How does CCMS help those relationships while solving issues of cashflow?

Another thing that Craig offers in the level for construction is mitigation, or mediation. So it’s about bringing both parties to the table, to say, ‘Okay, it’s not a case of you owe him £10K, pay it before we’re going to court. It’s you two, you’ve owed this person money for a while. What is the problem over here and how can we solve it?’. Craig doesn’t often use the courts by the way he manages people and emotions. It’s a reputational approach for all parties involved. If you can’t pay it all up front, let’s sort out a payment plan and let’s draft up the contract to get that done. That means the relationship is maintained, the money is going through the businesses, and then everyone gets to carry on.

Equally if you’ve got a lot term partner that you’re just trying to figure out ‘why haven’t you paid me, mate? It’s been two months’ and you need to take it off at the personal level and bring a fresh pair of eyes and ears into the room.

If we don’t allow these businesses to work together, the pool of relationships is lost. The pool will shrink, the relationships will shrink.

How does mental health and a business’ financial state link?

I’ve been doing some research into mental health within the industry as well. When we attended the I-Construct Roadshow, Anita Thornberry [Executive Director of the Haven Gateway Partnership which delivers I-Construct] gave a presentation which mentioned mental health in construction, and one of the other women attendees behind me was talking about wellness initiatives. She mentioned a shocking statistic about how many people within the industry, mainly men, struggle with their mental health and are damaging themselves or hurting themselves as a result. I’ve looked at other resources to get a wider view and there’s three main root causes of stress and mental health issues:

The first is financial, so that’s money owed to you and getting cash in the bank. CCMS can fix that.

The second one is relationships with people. It could be that there’s a few instances that there’s aggression on site because it’s quite a physical thing and you are tired or working in the rain, or things are delayed, and it’s taken out on people. Generally maintaining good relationships with other businesses is absolutely critical.

Then the third is workload. Workload can be shared more easily if you have trusted relationships with others.

It is common with businesses we work with for them to feel that something is not working down the chain; they’re being overworked for little money or losing money on jobs.

It’s the fact that these businesses feel like they can’t talk about it because they are being asked to talk about it through the lens of mental health, which isn’t much understood in the construction industry, but is a symptom of a bigger issue that’s eating away at this level of people within the industry. These three things, if we can tackle them without having to go too big and scary about mental health and having big seminars and big discussions about it. It’s actually very simple to pinpoint the root cause. The next step is making changes to address it.

That makes a lot of sense and is something that needs to be talked about more.

There are solutions to these problems which CCMS can help with.

You could fix the financial issues if the business higher up the supply chain paid on time and properly into a correct schedule, so it doesn’t have to be chased every day. The money would be flowing down. Currently the person that shouts the loudest gets the money. The relationships with businesses down the supply chain and relationships amongst the businesses themselves can be improved.

People need to be paid, they need to be valued, and they need to be listened to. And when you feel like you are the bottom of the pile, day-in-day-out, and you’ve got no other opportunities to get yourself out of it because you haven’t got enough money in your business to grow or pivot, then it’s just going to keep chipping away at you.

Craig and I have talked about this quite a lot, which is why I say we can do more than just say, ‘we’ll get your debt in’. We can provide those mitigation services, which Craig is all about, as well as our typical services like credit checks. CCMS want to make sure you’ve got the confidence before you even jump into a contract.

This is an arm that we really want to get into properly, not as a marketing lever, but an actual place we can sit and do some real good without risking the business going bust and without feeling like you are losing control.

What would you say to a business who is struggling but reluctant to reach out for help?

Depending on what the struggle is, it can be dealt with cleanly, professionally, and without risk to your business or reputation.

If someone is looking for debt collection but worried to chase the large contractor because they don’t want to risk losing the work, we remind our client that professional stringent processes reflect good business and shows that they are sustainable, so don’t worry about reaching out to us for help. And if the stringent process isn’t in place, we’ll help you put one together.

We are a financial business, so we won’t take money from a business that doesn’t have it. We’d figure out a way to make sure that it was a mutually agreeable contract. When we debt collect from the debtor, the money goes straight into the account of our client. Say they’ve got an enormous manager debt and they’re really struggling, perhaps we put in a place to payment plan as well so that you are not immediately pushing out money that you’ve just got in. We will only invoice for the money that we put on top of the original debt.

And if we know that some businesses might have like tax bills and things like that that are business critical, Craig will negotiate again and say, ‘Look, this is about sustainability and longevity and keeping the businesses going’.

About 20% of small businesses within the construction industry are in red. They’re going to go bust. And that’s within our regions [South East England] because we’re quite heavy down here for construction businesses,

At the I-Construct Roadshow, you were presented by Tier One contractors and one of the major projects. The major projects especially will be taking up a lot of the resource in the region very soon. What’s your advice to small and medium sized businesses that perhaps want to join those really large supply chains to get themselves in a good position to deliver that work?

First of all, really challenge the brief. Really challenge what the work will involve and make sure it matches what you service. Don’t jump into contracts because you risk losing them as opposed to knowing that they match exactly what you can. Don’t jump into contracts that are going to overstretch your business to a dangerous degree.

Do research. And then put really robust processes in place for review of performance and the payment schedules and make sure they’re signed before you commence work. The reason I say review of delivery of works is because a big way around for larger businesses not to pay smaller businesses is to say that the standard of works wasn’t acceptable. But that’s at the end of the project. That didn’t necessarily happen first, second day, third day on site. It’s like not having a regular one-to-one in an office environment and after a year you’re told no, that’s grounds for constructive dismissal.

There should be something in place to say, ‘we want to confirm with you on a regular interval that you’re happy with the work that we are doing’. And remind them of payment schedules, finding the right individuals in the accounts department to make sure that your terms have been read. You probably normally just deal with a site manager or a procurement manager or contract manager; you don’t actually think to connect with the accounts or payroll team. Because the project manager assumes your standard term days are 30 days for payment but you’ve asked for 15 days. That won’t work.

You need to have someone engage with them to make sure that everyone’s lined up. In addition, I would say that before approaching the major project to go through procurement, they’re going to look at your sustainability as well to make sure that you’re still going be around; if it’s a two-year project, will your business survive?

Get your cash position in a strong enough position so that you look and are sustainable for the jobs. By displaying that you have cash in the bank, that you have a small amount of age debt, you are viable and will be with the project to the end and won’t have to drop out…as long as they adhere to the payment schedule that you’ve agreed.

These major projects want to engage with the businesses you’re looking to tender to and understand how they build their relationships with their suppliers, so ask them lots of questions.

Is there anything else you’d like to add?

We provide a free one-hour ‘workshop’ consultation where you basically bring everything you’ve got and then Craig has a look at it within that hour.

Craig is the most down-to-earth person. You meet and he just wants to get stuck in and get the job done. There is nothing wrong with having a chat and saying, ‘I don’t know if I’m in trouble’.

For example, if you haven’t got your proper business name on an invoice or spell check. If you go into a dispute with someone and on your invoices, you don’t have their proper legal name, you haven’t named them, so it doesn’t stand up in court. If I put LTD as opposed to Limited, if that’s their registered Company’s House name, people always get out of it like that.

So it’s the little things like that, tiny technicalities. Like keeping hold of emails and logging contact etc. That’s the kind of thing Craig can look at and go, ‘Well, if you haven’t got this, you’ve got nothing. Have you got a solicitor?’ You know, put the solicitor you work with at the bottom of your invoices, or you can put our solicitor at the bottom of invoices or our name so you add some weight to it. Do you always attach your terms when you send an invoice, that kind of thing.

That is a chat you can have with us. You might go away from that chat thinking, ‘Oh, we can take care of that’. Or no, we don’t have someone in-house that I trust to really get that done. Or you’ve got a few different people, often an admin person or an office manager but they don’t have the knowledge.

Credit control management role is very different. It’s not invoicing. Debt collection and mediation within this industry needs careful thought now more than ever, and going into the new year, quarter one is going to be harsh, so they need to be looking at everything now. And why not make the most of the downtime over Christmas and do that? When everything slows down, you could take an hour, it could add ideas to your business. It could add thousands of pounds to your business.

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