Here's how to stay on top of your cashflow and get your invoices paid on time.
The Construction Contracts Act was created in 2002 to help Contractors get their invoices paid no later than 20 days after it has been issued, even if the Payer has disputed the payment claim with a Payment Certificate - regardless, they still have to pay any undisputed components of the Claim.
These three steps will help you on your way to managing your payment claim and keep your cashflow looking healthy.
1 - Use the Construction Contracts Act with every Project
The CCA and its forthcoming amendments next year are designed to set the play and the playing field between Payer and Payee (Principal and Contractor) when it comes to claiming and being paid.
It is not mandatory for a contractor to issue their invoices as Payment Claims. However, if a contractor does not utilise the payment claim process, they will not be able to rely on the provisions of the Act to make a Payer pay an undisputed portion of the invoice before the dispute is determined by the courts (if it goes that far).
This means the Payment Claim (invoice) must:
- be in writing
- contain sufficient details to identify the construction contract to which the payment relates
- identify the construction work and the relevant period to which the payment relates
- state the amount to be paid and the due date for payment (which defaults to 20 working days after the Payment Claim is served, unless the construction contract provides for a different due date)
- indicate the manner in which the payee calculated the claimed amount
- state that it is made under the Act.
A payment claim must also be accompanied by a written outline of the process for responding to the claim, and an explanation of the consequences of not responding to the claim or not paying the claimed amount.
PayLab allows a contractor to quickly generate a Payment Claim which serves as an invoice under the Act. It can also accompany an invoice if a contractor wishes to generate an independent invoice through their accounting system. This invoice can then be attached to the Payment Claim record within PayLab. PayLab’s payment claim template comes pre-formatted, legible and with all the fine print required by the CCA to hold the Payer accountable to the actions legislated by the Act.
2 - It is all in the presentation
First impressions count – your Payer (Principal) receives a multitude of claims and invoices in various formats from all their contractors. If your claim is set out clearly and consistently across multiple claims it is easier for your main contractor to follow, and therefore more likely to be certified and scheduled for payment.
Here is a typical PayLab claim layout with CCA addendum setting out the required response (Fig 1 & 2).
Moreover, if the Payer is also using PayLab, and they agree with your claim, the certification process is a quick three click process on their part. This is because your PayLab Payment Claim has generated their PayLab Payment Certificate automatically and therefore all they need to do is Approve and Issue!
3 - Remind them (and yourself) you have lodged a claim – and follow up
As mentioned above if your Payer has PayLab they are part of your PayLab ecosystem and will automatically receive a claim notification through PayLab – ready for them to certify. If they are not using PayLab a Payer will receive an automated email generated from PayLab with your claim attached as a PDF.
If your contract with the Payer clearly states when a payment schedule is due, these details can be recorded in PayLab. If the construction contract is silent on this, the default compliance date in PayLab will be 20 working days from the date of service of the payment claim, as per the CCA. Either way, you are covered by PayLab.
The PayLab Dashboard will keep you across your own claims and certificates, with a clear overview of what is due.
So, there you have it. Three ways to make claiming easier for you and your Payer so you get paid on time, every time!
If you want to read more of our adventures as we attempt to create A Smarter World, Digitally then subscribe below and follow us on Linkedin.