Project Bank Accounts, have you heard of them?

I was just browsing the above link about SELECT wanting to reduce the threshold for Project Bank Accounts to be mandatory. I had never heard of them, but it seems such a simple idea to safeguard the sub contractors further down the chain on a large project.  As I read it a company that tenders for a large contract must have in place this "project bank account" to ensure that smaller business sub contracting to the main contractor don't get left with big losses if a large contractor goes bump.

Doc H., 

A good start would be such companies paying ALL their bills in 30 days ................... but that is far too sensible.

Not sure how a project account could work .........

In Germany everybody pays in 30 days AFAIAA

From time to time I get "factors" offering me their services.

It seems to be on the lines of you submit the invoice to the factor who pay you immediately less a commission. They then bill the payee and have the fight (if any) to get paid.

I guess something like that might be worth considering if you have a suspicion that the payee may be in trouble. But you would have to read the small print, e.g would the factor want their money back from you if they never got paid by the payee?

ProDave said:

... would the factor want their money back from you if they never got paid by the payee?

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Yes they would, well at least Barclays did when we looked into it a few years ago.

Murdoch said:

...

In Germany everybody pays in 30 days AFAIAA

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I've been told that by a guy who was MD of the UK division of a German company.

He got roasted by HQ all the time for his poor credit record.

The Germans could not understand why, terms were not being met!

The late payment cancer of the UK...

Rife in the construction industry, and many others.

I stopped doing work for a care home because I did not like their payment terms.  At the end of the first month, home sends your invoice to head office. At the end of the second month, head office pass it to accounts. At the end of the third month, accounts schedule it for payment, which can still take another month.  They thought this was perfectly acceptable.  Meanwhile my supplier would not wait 4 months for their payment.

Sidewinder said:

The late payment cancer of the UK...

Rife in the construction industry, and many others

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Hear Hear !   

ProDave said:

I stopped doing work for a care home because I did not like their payment terms.  At the end of the first month, home sends your invoice to head office. At the end of the second month, head office pass it to accounts. At the end of the third month, accounts schedule it for payment, which can still take another month.  They thought this was perfectly acceptable.  Meanwhile my supplier would not wait 4 months for their payment.

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Yes I've had a few similar to that ,  not quite so bad though  , 4 months is just taking the Part Pee .  

The only way I could  do  Commercial / Industrial work was to have a 60 day  wholesalers account  .      I remember  quoting and winning some work ... they sent me a load of paperwork  , contract , H&S carp  and  their terms  which were  importantly stated as being 90 days .   

I phoned to say our terms were  60 days  ,  he said nobody gets 60 days  from us , so  as it was the days when we were mega busy anyway  I thought we just don't need it and we walked. 

On the domestic side , if an unknown builder ever phoned  out of the blue , asking us to quote ,  I would immediately think .."Why isn't he using his regular Sparks?  Whats  why are we flavour of the month? "      

Project Bank Accounts  

Was that where a third party , say a bank,  handled all the finance , paying sub- contractors  & suppliers  before the Main contractor got their greasy hands on it .  

ProDave said:

I stopped doing work for a care home because I did not like their payment terms.  At the end of the first month, home sends your invoice to head office. At the end of the second month, head office pass it to accounts. At the end of the third month, accounts schedule it for payment, which can still take another month.  They thought this was perfectly acceptable.  Meanwhile my supplier would not wait 4 months for their payment.

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Why would your supplier have to wait?

they don't. This is why I stay away from long payment term businesses, or, if I do accept a contract it gets secial rates ie +30%. Effectively I charge for using MY CREDIT facilities.

ProDave said:

I stopped doing work for a care home because I did not like their payment terms.  At the end of the first month, home sends your invoice to head office. At the end of the second month, head office pass it to accounts. At the end of the third month, accounts schedule it for payment, which can still take another month.  They thought this was perfectly acceptable.  Meanwhile my supplier would not wait 4 months for their payment.

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I'll try again .................... why?

Well they'd have him in court  I presume , Murdo .     Dave , I'd guess has a 30 or 60 day account  after that you're on stop .   My main supplier , Denmans  (Rexel )   stop your account after a week overtime,  then I presume  they would start the warning letters  of court action etc  ...I don't know as I always pay on the turn of the month.  

Evans Electric said:

Well they'd have him in court  I presume , Murdo .     Dave , I'd guess has a 30 or 60 day account  after that you're on stop .   My main supplier , Denmans  (Rexel )   stop your account after a week overtime,  then I presume  they would start the warning letters  of court action etc  ...I don't know as I always pay on the turn of the month.  

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All businesses need to have cash reserves to cover such non payments .....just because your client hasn't paid doesn't give you a get out clause to your supplier ... You owe, you pay

FYI Rexel offer prompt payment discounts if you ask .... And prompt is within 30 days.

in my 8 years of being SE I have never missed a payment ..... And often when builders pay late, I still pay my suppliers .....

Murdoch said:

paid doesn't give you a get out clause to your supplier ... You owe, you pay

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Is'nt that what Dave  and myself are saying  ....WE have to pay OUR bills   but Dave's customer  ( and some I've had too) assumes  he can sit on his payment for 4 months   while  Dave subsidises  them for  the cost of his labour & materials . 

In this country its become the norm to slow down outgoing payments  , whereas in Germany  it would be a disgrace . 

It used to happen  here ,  the city council  would make contractors wait forever  to be paid   until  many were  turning the offers to quote down .  

The other reason  for turning down was the order that  one third of your workforce MUST  be made up by workers from CERTAIN  inner city areas  ......a map was supplied showing the areas  where you MUST recruit your labour from .

( How I wish I'd kept  one of those specifications )   

I believe Mrs Thatcher's government had a quiet word about  freedom of choice...not a communist state etc etc .  

^^ My bad .............. 

Governments of all colours should come together and legislate for 30 days .............., not 60, not 90, not 120

If everybody paid on 30 days, some of the other dubious actions couldn't take place.

Murdoch said:

I'll try again .................... why?

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Most of my trade accounts expect payment at the end of the month following the month the purchase was made in.  They will usually wait until the end of the second month and send a snotty reminder. But if I go beyond that without paying they will lock the account and refuse orders. So unless I have no need to buy anything, I certainly cannot wait 4 months to pay them.

Murdoch said:

All businesses need to have cash reserves to cover such non payments .....just because your client hasn't paid doesn't give you a get out clause to your supplier ... You owe, you pay

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Absolutely and that is what I did.  I then simply made a business decision that I did not wish to do further work for a company that I knew will take 4 months to pay me.

Can anyone imagine a Plasterer doing some work at Dave's  care home  and them saying we'll pay you in 4 months  !!!!

:slap  

Evans Electric said:

Can anyone imagine a Plasterer doing some work at Dave's  care home  and them saying we'll pay you in 4 months  !!!!

:slap  

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Nobody who has delivered a product or service should have to wait for more than 30 days - and equally the people who expect payment on the day need to get to understand that customers might need a few days to pay ...

if only that was he case @Murdoch.

I point blank refuse any calls for 'call out' wok from maintenance companies in Scotland after a job at Spud U LIke took over 90 days to pay ( and  a couple of other companies weren't much better). I tell a certain local building maintenance company that I worked for for many years to go forth these days after they went from 10days, to 30 days, to more like end of next month if you are lucky. And private customers get contracts these days with terms and conditions - not that these can prevent them avoiding payment for 56days before starting small claims court action (contract does make it easier to persue and I find people tend not to mess about after signing a contract). The only work that I don't tend to have problems with is solar, where it is standard practice to take deposit upfront of 30%, and they don't get FiT paperwork until the balance has been paid. 

Many moons ago I was in the procurement department of a multinational company, they were notorious for late payment.

We desperately needed a 300A LSE (Laurence Scott Electromotors) contactor. I ordered it and waited………… Finally I phoned LSE “we’re sending you nothing until we get paid for the last three orders!”

A bit of digging around and I found out LSE bought in the contactors from MCS (Manchester Contactor and Switchgear) so I placed the order with them.

Strangely both LSE and MCS went bankrupt.