The collapse of construction giant Carillion has raised a lot of questions over the stability of the industry.
It is estimated that Carillion has affected as many as 30,000 small businesses.
The projects Carillion worked on will still need to be delivered. The 450+ contracts for the public sector, such as for schools, hospitals and prisons, will be maintained under the watchful eye of the “special managers” at PwC. But what about the private sector projects? When the Carilion collapse was announced the advice was to cease all work as there was no guarantee of payment for work carried out.
For the private sector contracts where Carillion was just one of a number of contractors, like HS2, work is likely to be consumed by Balfour Beatty, Kier, Mitie, Interserve and Mears and others. It is not business as usual by any measure.
What does this all mean to the subcontractors and suppliers and how can they take control of their businesses?
If you are one of the affected businesses, make sure you reach out for support.
In addition to the government support lines there are other organisations who are offering expert advice:
- BESA and the ECA have been quick to act in providing support and advice for their members. If you’re a member of a trade association body, check to see if they can assist.
- Read your contract, where do you stand?
- Communicate with your bank.
Even if you have not directly been affected by the Carillon collapse, the chances are that those within your supply chain have been. Either way, there are some simple steps you can take to safeguard your business.
What can you do to safeguard your business in the future?
- Ensure you have contracts in place outlining key areas like payment terms and termination clauses. In the event that your contractor is forced to close because it is financially unsuccessful, a good contract should help you negotiate your way out. Seeking professional legal advice is essential and doesn’t need to cost the earth. If you are a member of an association, you may have access to a legal helpline.
- Keep an eye on your outstanding debts. Utilise credit reporting companies to track the financial health of your major clients. If you use simPRO you can run regular reports to make sure your cash keeps flowing. Chase for payment when invoices go overdue as the longer they are left, the harder it will be to get paid.
- Where possible invoice as the job progresses instead of waiting until the end. This will help with cash flow and paying suppliers. Use a system that will not only keep track of your costs, but will allow you to do stage payments.
- Keep track of your job profitability. With job management software, you can produce accurate quotes and then keep track of your actual costs against your projected costs as the job progresses.
- Spread your work across different contractors and sources as much as possible. In the event of someone going into liquidation or not paying an invoice, the business will still be operational.